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curl --request GET \
  --url http://api.getaltdata.com/delivery/api/v1/calls
[
  {
    "call_id": "66f66406a88f220001ac3b8e",
    "call_title": "AYI Conference Call",
    "symbol": "AYI",
    "start_time": "2025-01-09T13:17:09Z",
    "end_time": "2025-01-09T13:17:11Z",
    "duration": 0,
    "status": "COMPLETED",
    "created_at": "2025-01-09T13:17:09.064104Z",
    "updated_at": "2025-01-09T13:17:11.390407Z",
    "transcripts": {
      "transcript_id": "92ff0342-9c20-45bc-a1f1-a8c373a3bb34",
      "call_id": "66f66406a88f220001ac3b8e",
      "text": " Good morning and welcome to Acuity Brand's fiscal 2024 fourth quarter earnings call. At this time, all participants are in the listen only mode. After the speaker's presentation, the Company will conduct a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Charlotte McLaughlin, vice president of Investor Relations. Charlotte, please go ahead. Thank you Operator Good morning and welcome to the Acuity brand's fiscal 2024 fourth quarter and full Year Earnings Call. On the call with me this morning, O'Neill Asch, our chairman, President and Chief Executive Officer and Karen Holcomb, our Senior Vice President and Chief Financial Officer. Today's call will include updates on our strategic progress and on our fiscal 2024 fourth quarter and full year performance. There will be an opportunity for QA at the end of this call. As a reminder, some of our comments today may be Forward looking statements. We intend these forward looking statements to be covered by the Safe harbor provisions of the Private Securities Litigation Reform act of 1995, as detailed on slide 2 of the accompanying presentation. Reconciliations of certain non GAAP financial metrics with their corresponding GAAP measures are available in our 2024 fourth quarter earnings release and Supplemental presentation, both of which are available on our Investor relations website at www.investors.acuitybrands.com. thank you for your interest in Acuity Brands. I will now turn the call over to Neil Asch. Thank you Charlotte and thank you all for joining us this morning. Our fiscal 2024 fourth quarter performance was strong. We grew net sales in both lighting and spaces, delivered margin expansion and increased earnings per share. Fiscal 2024 was a successful year of improved operating performance that delivered end user satisfaction and improved financial results. In ABL we grew net sales $11 million, increased our adjusted operating profit by $13 million and expanded our adjusted operating profit margin to 18%. These results are being driven by our strategy to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business and to drive productivity. In August we announced that we had combined our lighting and supply chain organizations under one leader to better align the end to end connectivity of our ABL processes. I appointed Sachsenkpal to lead the combined organization. Satch joined us about three years ago in a growth and transformation role. He is a dynamic leader who has the ability to bring the business together in order to accelerate growth and to drive productivity. This quarter we continue to further our ongoing Product Vitality, one of our recent product launches was Holobay by holofane, a capable and configurable round high bay for use in industrial environments, manufacturing environments and warehouse spaces. Hollow Bay reinforces Holophane's leadership position in the industrial space by leveraging both existing and new technology to deliver game changing performance. Its innovative thermal management can withstand the most demanding environments. It has the broadest lumen output options on the market, is 5 to 10 pounds lighter than alternatives, has multiple mounting options and is configurable with our in light controls. This is the biggest technology improvement in over a decade in industrial high bays. Our team has continued to be recognized for innovation and for the value that our products bring to our customers. In the fourth quarter, many of our lighting solutions were selected for the 2024 Illuminating Engineering Society Progress Report which showcases the year's most significant advancements in the art and science of lighting, including Lino by Alight, the Gotham Aivo Shallow Recessed Downlight and the Lithonia Frame, all of which have been highlighted on earnings calls this year. We additionally won for our Cyclone Crosswalk, a street light that was designed to maximize pedestrian safety through innovative contrast and vertical illumination, and for the Hydrail Tiara, a compact in grade fixture that is used in outdoor architectural and landscape lighting. Its innovative sealing capabilities allow for maximum structural integrity that ensures long term use with minimal maintenance. Now I'd like to take a step back and recap our achievements this year in the lighting business. Overall, our financial performance was strong and we made progress on our strategy and on our initiatives. We evolved our differentiated product portfolios made to order, design select and contractor select to create the most effective way for end users and contractors to get what they need when they need it for their specific projects. And we invested for future growth prioritizing new verticals where we have not historically competed or where we are underpenetrated, notably in the refueling market where we developed a new line of tailored product solutions, and in the horticulture vertical where where we built a product portfolio to service the horticulture environment through organic and inorganic product development. Now moving on to our Intelligent Spaces group which delivered impressive growth and margin performance. Our mission in our Intelligent Spaces business is to make spaces smarter, safer and greener through a strategy of connecting the edge to the cloud in spaces. We are focused on increasing our addressable market by expanding where we compete and what we can control. France was Distech's original market. Outside of North America we have an impressive market position as a result of having the most adaptable and capable technology on the market and not surprisingly, our products were used in many of the facilities in Paris this summer. In the Aquatic center, our Eclipse solutions regulated water and energy consumption. Our Eclipse controllers played a key role in managing temperature and air quality and acoustics. At the Arena Port de la Chapelle, which hosted events like gymnastics and badminton. In the Grand Palais, our controllers enabled nighttime window automation to manage temperature and save energy. And in Maxwell hall, we demonstrated the modularity of our Eclipse solutions. It served the needs of the athletes when the facility was being used as part of the athletes village, and now it is easily adapted to the requirements of the incoming occupants as the space transforms into offices. Our intelligent spaces business had a very good year. We expanded our addressable market, continued our impressive growth and increased margins and now let's look forward. In our lighting and lighting controls business, we've demonstrated performance that is clearly differentiated from the rest of the market and we're not done. We are confident in our ability to grow this business and have a clear growth algorithm to do so. First, as the largest company in the North American lighting industry, we will grow with the market. Second, we will continue to take share and third, we will invest for growth by entering new verticals where we have either not historically competed or where we are underpenetrated. Taken together over a long period of time, we will we believe that our lighting business will grow mid single digits. We have also demonstrated that we can improve margins. In fiscal 2020 our adjusted operating profit margin was 15% and now in fiscal 2024 it has increased to 18%. We are confident that we can continue this trend and believe that we can add around 50 to 100 basis points of adjusted operating profit margin per year. In the lighting business, we have made ABL more predictable, repeatable and scalable. It is a high quality strategic asset and a core pillar of our company. In our intelligent spaces business, we are delivering meaningful outcomes for end users that are powered by disruptive technologies and that generate strong financial results. We are expanding our addressable market, we are growing sales and we are increasing margins. Our open edge to cloud solutions currently operate buildings to maximize occupant experience and minimize energy and operational costs and we believe we can do more in the future. We see a future where the data generated from managing a built space, from what happens in a built space, and from who is in a built space comes together in new and unique ways. Both our organic and inorganic efforts will be focused on continuing to add more disruptive technologies that bring together a new vision of data interoperability to drive end user outcomes. We have a strong pipeline of internal development and small and medium sized acquisitions to satisfy this vision. In conclusion, we are delivering better outcomes for our stakeholders and compounding wealth for our shareholders. We are continuing to drive improvements in order to make Acuity a much larger and more impactful company in fiscal 2025 and beyond. Now I'll turn the call over to Karen who will update you on our fourth quarter performance and provide the outlook for fiscal 2025. Thank you Neil and good morning to everyone on the call. We delivered strong performance in our fourth quarter. Sales in our lighting business grew, we continued to deliver mid teen sales growth in our spaces business and both businesses delivered impressive margin improvements. We increased our adjusted diluted earnings per share and generated significant full year operating cash flow for total AYI. We generated net sales in the fourth quarter of $1 billion which was $22 million or 2% above the prior year. As a result of growth in both the lighting and spaces businesses. We continued to deliver year over year margin improvement during the quarter our adjusted operating profit was up $16 million from last year and we expanded our adjusted operating profit margin to 17.3%, an increase of 120 basis points from the prior year. This increase was largely a result of the significant year over year improvement in our gross profit margin driven by product vitality, the management of price and cost, and productivity improvements. This quarter we again generated net interest income as a result of the strong cash position on our balance sheet and our adjusted diluted earnings per share of $4.30 increased $0.33 or 8% over the prior year. In ABL, net sales were $955 million, an increase of $11 million or around 1%. This increase was driven by improvements in the majority of our channels, but was primarily the result of higher net sales in our corporate accounts. Channel adjusted operating profit increased to $172 million and we delivered adjusted operating profit margin of 18%, a 120 basis point improvement over the prior year. Net sales in Intelligent spaces for the fourth quarter were $84 million, an increase of 17% as Distech delivered impressive growth driven in part by large data center projects. Adjusted operating profit in intelligent spaces was $22 million with the adjusted operating profit margin over 25%. Now turning to our cash flow performance. In fiscal 2024 we generated $619 million of cash flow from operating activities, a $41 million increase over fiscal 2023. We continue to earn attractive returns on the cash that we have on our balance sheet and ended the year with $846 million of cash. We allocated capital consistent with our priorities, invested $64 million in capital expenditures and acquired the assets of Arise Horticulture Lighting. We increased our dividend per share 15% and allocated approximately $89 million to repurchase over 454,000 shares at an average price of $194 per share. Since the beginning of the fourth quarter of fiscal 2020, we have repurchased approximately 9.5 million shares at an average price of about $145 per share, which was funded by organic cash flow. This amounts to about 24% of the then outstanding shares. I now want to spend a few minutes on our outlook for 2025. Consistent with our prior practice, we are going to provide annual guidance anchored around net sales and adjusted diluted earnings per share. We will also provide you with certain assumptions which you can find in the supplemental presentation available on our website. After the conclusion of this call. For full year fiscal 2025, our expectation is that net sales will be within the range of $3.9 billion and $4.1 billion for total AYI. This is based on the assumptions that ABL will deliver low to mid single digit sales growth which we anticipate will be more back half weighted in fiscal 2025 and ISG will generate sales growth in the low to mid teens. As we continue to increase our addressable market by expanding where we compete and what we can control, we expect to deliver adjusted diluted earnings per share within the range of $16 to $17.50. To conclude, we delivered impressive performance in fiscal 2024. We improved margins, increased earnings per share and generated strong cash flow from operations. We've allocated capital effectively investing for future growth in our existing businesses and we finished the year with a very strong balance sheet. We are positioned well to continue to deliver sales and earnings growth in fiscal 2025. Thank you for joining us today. I will now pass you over to the operator to take your questions. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again, our first question comes from Tim Woj with Baird. Your line is now open. Good morning. Yeah. Hey guys. Good. Good morning. Thanks for the time. Maybe if I could just start with one question. Neil. Just as you kind of look at the current market conditions, obviously there's a lot of choppy data points out there. I'm just kind of curious if you can give us an update, just kind of what you're seeing around Quoting kind of ordering and release activity in the ABL business. Yeah, thanks, Tim. So, first of all, we feel good about where we're going for fiscal 25, so we're building off of. Of strength. The ABL business returned to growth in the fourth quarter. Our operating performance was very strong. As we look forward, we're reasonably confident about fiscal year 25. I think our view is consistent with most of the data that we've seen, which is that calendar year 25 is expected to be pretty strong. So the conditions now are, I would say, relatively normal, neither extraordinarily good nor bad on the ABL side. So we're focused there on the growth algorithm, and we feel good about kind of the full 25, albeit more, as Karen said, back and loaded. Okay. Okay, that's helpful. And then maybe just. You guys have built quite a cash pile on the balance sheet at this point, which is a good situation to have any kind of update on, just kind of how you're thinking about the priorities to capital allocation. I noticed you didn't really buy much stock this quarter from a repurchase standpoint. So any kind of. Just update on kind of how you're thinking about capital allocation and if any significant changes there. Karen, you want to start and then I'll follow up? Yep, sounds good. So, Tim, you know, we're really pleased with our cash flow generation. This year. We had $555 million of free cash flow, which was $44 million higher than last year. You know, we've demonstrated that we're capable with our cash flow to satisfy all of our priorities. We've invested in our current businesses for growth. We've got a healthy MA pipeline, we increased the dividend, and we did repurchase $89 million of shares outstanding. So on the share repurchases, you know, at the beginning of the year, we did provide you with expectations that we would repurchase about 40 to 60 million shares this year. So at the midpoint, we bought back about 80% more than we expected to, and we did it at an average price of around $194 a share. So we feel good about all of the repurchases this year and how we executed there. And so then I'll let Neil talk more about the M and A pipeline. Yes, and before I do that, Tim, I'll just build on Karen's point. I think the takeaway of our cash generation and balance sheet is that we have the capacity to do it all. We have the capacity to invest for growth in our current businesses. Which we've demonstrated through the refueling and horticulture vertical and the continued expansion at isg. We have increased our dividend, we've repurchased shares, as Karen pointed out. And then as we look forward, we believe we have a strong pipeline of opportunity of small and medium sized acquisitions to grow both of our businesses. Our priority is around isg and we believe that both our organic and inorganic efforts will continue to be directed towards developing and acquiring disruptive technologies that have the opportunity to bring data together in new and interesting ways that deliver end user outcomes. And so. But I think the core takeaway is that we believe with our performance and our balance sheet that we can do it all from a cash perspective. Okay. Okay, sounds good. Good luck on the year. Thank you. Thank you. Our next question comes from the line of Christopher Glenn with Oppenheimer and Company. Your line is now open. Hi. Thanks. Congratulations on strong results all year. And I was curious for an update on Design select, how the reception's going there and the independent agency adoption to it. Any variation of trends across their early adopters or laggards? Yes. Thanks, Chris. So big picture, we're really pleased with the way the portfolio segmentation is going. So the Contractor select portfolio has performed exceptionally well. We obviously have the made to order portfolio. And now as we kind of dig in on Design Select, Satch and I were on the road over the course of the last couple weeks. We met with distributors and agents and the reaction is universally positive. Their hope for us is that we bring more and more of our product families into the portfolio. So big picture, it's a lot more effective for, for each of them to ensure that they're ordering the right things for the project, that they're specing, and that our continued increased performance and service levels makes everything better for them, makes them more profitable, makes distributors more profitable and allows them to choose us. And so on the agent side, the reaction has been incredibly positive. Distributors want more of it faster and. And we're going to continue to methodically churn it out as we meet our internal targets for product vitality and service performance. That certainly sounds good. And just you mentioned DC Projects data center for the ISG segment and I don't recall you calling that out in the past. So just curious, you know, how much of a driver that vertical is in fiscal 25. Anything on win rates pipeline and how that is is that selection process for Distech is rolling around, rolling ahead. Yeah. So we obviously had an exceptional quarter on that front last quarter. If we take two steps back on kind of data center control, there's digital control and then there's pneumatic control. We are basically the leader in digital control. So for the, for the scalers who use digital control, we are the choice. And so that's what's the driver behind that. So it's been a part of our business for the last several years. We just had a really, we had a really good quarter this year that obviously that portion of the business will continue to grow both in the U.S. and in some of the markets outside the U.S. thanks. And I'll wrap up with the housekeeping question. 8 million miscellaneous expense, just context, timing of that. Yeah. So the miscellaneous expense, there's a couple things that fall in there. One is our pension expense, which is pretty consistent quarter over quarter. The big mover this quarter was really around foreign currency movements, and that's primarily due to two areas. One is the cash that Distech generates, which is significant. And so we had some foreign currency movements on the Canadian dollar, and then the other would be around our lease liabilities in Mexico and we had some unfavorable movements there. And that's what you saw. So when you look ahead, it really depends on what the FX rates are doing. And then we're working to manage our cash effectively. Thank you. Our next question comes from the line of Joe O'Day with Wells Fargo. Your line is now open. Great, thank you. Hi, good morning, everyone. Thanks for taking my questions. Neil, wanted to start just in terms of any additional color tied to your commentary around calendar year 2025 is expected to be pretty strong. Any of the contributors there with respect to interest rates or what's been a prolonged period of time with maybe more muted activity and starting to see that shift, but any of the drivers and confidence behind that. And then related to that, when you talk about the growth algorithm within lighting and kind of looking at something in the. If it's mid single digits through cycle, just how you break that down in terms of market growth outgrowth price for some perspective there. Yeah, sure. So first on the economy, CEOs are notably terrible economists, so. So this commentary is worth what you're paying for it? I would say we do a fair amount, however, of data analysis and our data analysis, trend analysis continues to be consistent, which is that there will be. There is a fair amount of activity on the horizon generally, I'd say I mentioned Satch and I were traveling with agents and distributors and what they would say is that they are very busy, but projects aren't releasing as consistently or as they Will So in other words, there's stuff building up in the pipeline we're obviously going to work through. We were things like we were in, I'll take one market for example. We were in Chicago and there's been obviously a significant decrease in on the one hand, office space that's been put back, on the other hand, a slowdown in warehouse. But the consumption focusing on warehouse for a second has to turn because they're going to reach a low point in capacity. So these things will work themselves out. And so over the longer term we feel really good about that. So then transitioning to the growth algorithm and I'll answer each of your questions. So the first is we're the largest in North America, so obviously we're going to in some manner be tied to the performance of the industry. So that's kind of step one. The second is our performance is clearly differentiated from any other lighting company that we can identify in North America and frankly anywhere else. So we will continue to take share. And third is despite the fact that we are the largest and we are taking share, there are other verticals within the North American lighting industry where we have been either chosen not to compete or are under penetrated. So we spent a minute on refueling, for example, and I will focus on that. We literally had no business zero in refueling as of 12 months ago. We created a new canopy product portfolio that meets the needs of gas stations and convenience stores and QSR restaurants. We signed up the largest agent independent agent in the network and we are going to prosecute that opportunity. Opportunities like that can be chunky as they add to, as they add to the portfolio. So we feel good about the mix of those three things. So we're confident that whatever the lighting industry growth is, we will outgrow it. And then finally on the strategy on price. So we believe that we through our product vitality efforts and through our service, we are delivering more valuable products and services to, to the industry and we will get paid for that. So we have a strategic pricing strategy which allows us to focus on continuing to one, deliver that value to the lighting industry. So they will continue to reap the benefits of that. At the same time we can continue to earn higher margins. So we feel really good about kind of where ABL is positioned now as we look, look forward to the next kind of three to five years. I appreciate all the color and then also just wanted to ask on the east coast port situation, just any color on your exposure there, your approach to kind of managing the situation. Not sure if there's Any sort of buffer inventory that you're looking at and how you think about sort of timeline before it could convert to any challenges for your operating model. On the west coast ports. Most of our products come into the west coast ports. So we do ship a few specific products from the east coast. But depending on how long it lasts, we feel pretty good about where we are from an inventory position on those ports specific products so that customers won't be impacted. There could be some secondary impact as volumes move to the west coast, but we don't believe we should be materially impacted at this time and are just continuing to monitor the situation. Got it. Thank you. Thank you. As a reminder to ask a question at this time, please press star 11 on your Touchstone telephone. Our next question comes from Brian Lee with Goldman Sachs and company. Your line is now open. Thanks for taking the questions. I guess. First one, just as I think about the different segments and channels, the independent sales network obviously a big one for you guys. Back to growth, first time in over a year. Plus are you seeing a true inflection in trends there? Maybe kind of speak to the outlook for that business and if you can help bracket what you think growth scenarios look like for that specifically in 25. Is that flat up, low, single, mid single? Just trying to get a sense specifically on that part of the business. Yes. Brian, thanks for joining. I would just build on my answer to Joe there. So from a trends perspective, as Karen said, we expect the lighting business generally to be in the low to mid single digits growth this year which is more skewed towards calendar year 25. I will take a minute to outline and emphasize the power of our independent sales network. So I haven't talked about that in a while but it's worth taking a step back and reflecting on that. It's round number 60% of our lighting business. We have about 80 agents in North America. They have about on average 50 FTEs. So we have 4,000 sales support professionals throughout North America selling our products. We are generally number one in each market in which we compete. They are generally number one in each market they compete and the symbiotic relationship between them and us is really strong. So going all the way back to when I first got here and we immediately kind of went into the pandemic and all of the mishigash or the of the global supply chain stuff that followed that, our agent performance, the performance of the independent sales network has been very consistent. So they're continuing to perform for us and are an important part of our growth and as I mentioned, as we've been out on the road talking to them, they're working very hard, they have a lot of activity right now. Projects are a little slow to release, but they will over time. So taken together that kind of. They are a contributor, but not the only contributor to our expected continued kind of mid single digit sales growth over a long period of time on the lighting business. Okay, super helpful. And then maybe just question on the gross margins. If I look at the fiscal 25 guidance here, it kind of implies if our numbers are right, gross margin essentially flat on a percentage basis with fiscal 24, where you obviously had very good performance on that metric. So is it fair to assume the additional margin leverage in fiscal 25 is coming more at the operating level? And then as we think about that, just maybe contextualize the long term target for 50 to 100 basis points annually. Is that going to be a split between ongoing gross margin leverage and at the OPEX line, or is it more going to be shifting toward kind of leverage on the OPEX line like it seems like it could be for 25? Yes. Thanks for the question. Let me kind of highlight a couple things on that. First is it's fair to say that our gross margin performance has been incredibly strong over the the last several years and we don't think that that's going to abate. So the second on the OPEX line is that we have some geographic changes. So for example, as we invest in technology to help power the gross margin improvement, that technology investment shows up in sdna. As we now focus on operating profit margin and the combination of those two, we think the 50 to 100 basis points annual target can continue for the foreseeable future. It will be a mix of those two, so it won't be perfectly linear in any specific period. But we believe that we have opportunities in both areas. We have the opportunity to continue on gross margin expansion to varying degrees and different years. And we believe that we have the opportunity to leverage OPEX as we continue while we still continue to invest to drive the higher margin. So taken together, I really wanted to use this opportunity to highlight how powerful our lighting business is. It is clearly a top performer in its industry. We have demonstrated that both we can outgrow the industry and we can continue to expand margins. So. So it's a strategically valuable industry leading asset for us for the long term. All right, thanks a lot. I'll pass it on. Thanks. Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Neil Ashe for any closing remarks. Great. Thank you all for joining us today. We're very pleased with the performance in our fiscal 2024. It was incredibly strong. As we look forward to FY25, our lighting business will continue to be the industry leader. That business will grow. We have a clear algorithm to do that. We will continue to expand margins there for the foreseeable future. And we're excited about the opportunities in our spaces group as we continue to deliver disruptive technologies that stitch data together in new and interesting ways to drive end user outcomes. We feel like we can continue to expand what we can control and where we can compete and we're excited about that possibility. And finally, all of that delivers incredibly strong cash generation for us to use capital allocation to drive value for stakeholders and compound wealth for our shareholders. So we're looking forward to the year ahead and the year after that and the year after that. So thank you for being with us this morning and we'll talk to you again in another quarter. This concludes today's conference call. Thank you for your participation. You may now disconnect.",
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          "text": "Thank you Neil and good morning to everyone on the call. We delivered strong performance in our fourth quarter. Sales in our lighting business grew, we continued to deliver mid teen sales growth in our spaces business and both businesses delivered impressive margin improvements. We increased our adjusted diluted earnings per share and generated significant full year operating cash flow for total AYI. We generated net sales in the fourth quarter of $1 billion which was $22 million or 2% above the prior year. As a result of growth in both the lighting and spaces businesses. We continued to deliver year over year margin improvement during the quarter our adjusted operating profit was up $16 million from last year and we expanded our adjusted operating profit margin to 17.3%, an increase of 120 basis points from the prior year. This increase was largely a result of the significant year over year improvement in our gross profit margin driven by product vitality, the management of price and cost, and productivity improvements. This quarter we again generated net interest income as a result of the strong cash position on our balance sheet and our adjusted diluted earnings per share of $4.30 increased $0.33 or 8% over the prior year. In ABL, net sales were $955 million, an increase of $11 million or around 1%. This increase was driven by improvements in the majority of our channels, but was primarily the result of higher net sales in our corporate accounts. Channel adjusted operating profit increased to $172 million and we delivered adjusted operating profit margin of 18%, a 120 basis point improvement over the prior year. Net sales in Intelligent spaces for the fourth quarter were $84 million, an increase of 17% as Distech delivered impressive growth driven in part by large data center projects. Adjusted operating profit in intelligent spaces was $22 million with the adjusted operating profit margin over 25%. Now turning to our cash flow performance. In fiscal 2024 we generated $619 million of cash flow from operating activities, a $41 million increase over fiscal 2023. We continue to earn attractive returns on the cash that we have on our balance sheet and ended the year with $846 million of cash. We allocated capital consistent with our priorities, invested $64 million in capital expenditures and acquired the assets of Arise Horticulture Lighting. We increased our dividend per share 15% and allocated approximately $89 million to repurchase over 454,000 shares at an average price of $194 per share. Since the beginning of the fourth quarter of fiscal 2020, we have repurchased approximately 9.5 million shares at an average price of about $145 per share, which was funded by organic cash flow. This amounts to about 24% of the then outstanding shares. I now want to spend a few minutes on our outlook for 2025. Consistent with our prior practice, we are going to provide annual guidance anchored around net sales and adjusted diluted earnings per share. We will also provide you with certain assumptions which you can find in the supplemental presentation available on our website. After the conclusion of this call. For full year fiscal 2025, our expectation is that net sales will be within the range of $3.9 billion and $4.1 billion for total AYI. This is based on the assumptions that ABL will deliver low to mid single digit sales growth which we anticipate will be more back half weighted in fiscal 2025 and ISG will generate sales growth in the low to mid teens. As we continue to increase our addressable market by expanding where we compete and what we can control, we expect to deliver adjusted diluted earnings per share within the range of $16 to $17.50. To conclude, we delivered impressive performance in fiscal 2024. We improved margins, increased earnings per share and generated strong cash flow from operations. We've allocated capital effectively investing for future growth in our existing businesses and we finished the year with a very strong balance sheet. We are positioned well to continue to deliver sales and earnings growth in fiscal 2025. Thank you for joining us today. I will now pass you over to the operator to take your questions.",
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          "text": "Thank you Charlotte and thank you all for joining us this morning. Our fiscal 2024 fourth quarter performance was strong. We grew net sales in both lighting and spaces, delivered margin expansion and increased earnings per share. Fiscal 2024 was a successful year of improved operating performance that delivered end user satisfaction and improved financial results. In ABL we grew net sales $11 million, increased our adjusted operating profit by $13 million and expanded our adjusted operating profit margin to 18%. These results are being driven by our strategy to increase product vitality, elevate service levels, use technology to improve and differentiate both our products and how we operate the business and to drive productivity. In August we announced that we had combined our lighting and supply chain organizations under one leader to better align the end to end connectivity of our ABL processes. I appointed Sachsenkpal to lead the combined organization. Satch joined us about three years ago in a growth and transformation role. He is a dynamic leader who has the ability to bring the business together in order to accelerate growth and to drive productivity. This quarter we continue to further our ongoing Product Vitality, one of our recent product launches was Holobay by holofane, a capable and configurable round high bay for use in industrial environments, manufacturing environments and warehouse spaces. Hollow Bay reinforces Holophane's leadership position in the industrial space by leveraging both existing and new technology to deliver game changing performance. Its innovative thermal management can withstand the most demanding environments. It has the broadest lumen output options on the market, is 5 to 10 pounds lighter than alternatives, has multiple mounting options and is configurable with our in light controls. This is the biggest technology improvement in over a decade in industrial high bays. Our team has continued to be recognized for innovation and for the value that our products bring to our customers. In the fourth quarter, many of our lighting solutions were selected for the 2024 Illuminating Engineering Society Progress Report which showcases the year's most significant advancements in the art and science of lighting, including Lino by Alight, the Gotham Aivo Shallow Recessed Downlight and the Lithonia Frame, all of which have been highlighted on earnings calls this year. We additionally won for our Cyclone Crosswalk, a street light that was designed to maximize pedestrian safety through innovative contrast and vertical illumination, and for the Hydrail Tiara, a compact in grade fixture that is used in outdoor architectural and landscape lighting. Its innovative sealing capabilities allow for maximum structural integrity that ensures long term use with minimal maintenance. Now I'd like to take a step back and recap our achievements this year in the lighting business. Overall, our financial performance was strong and we made progress on our strategy and on our initiatives. We evolved our differentiated product portfolios made to order, design select and contractor select to create the most effective way for end users and contractors to get what they need when they need it for their specific projects. And we invested for future growth prioritizing new verticals where we have not historically competed or where we are underpenetrated, notably in the refueling market where we developed a new line of tailored product solutions, and in the horticulture vertical where where we built a product portfolio to service the horticulture environment through organic and inorganic product development. Now moving on to our Intelligent Spaces group which delivered impressive growth and margin performance. Our mission in our Intelligent Spaces business is to make spaces smarter, safer and greener through a strategy of connecting the edge to the cloud in spaces. We are focused on increasing our addressable market by expanding where we compete and what we can control. France was Distech's original market. Outside of North America we have an impressive market position as a result of having the most adaptable and capable technology on the market and not surprisingly, our products were used in many of the facilities in Paris this summer. In the Aquatic center, our Eclipse solutions regulated water and energy consumption. Our Eclipse controllers played a key role in managing temperature and air quality and acoustics. At the Arena Port de la Chapelle, which hosted events like gymnastics and badminton. In the Grand Palais, our controllers enabled nighttime window automation to manage temperature and save energy. And in Maxwell hall, we demonstrated the modularity of our Eclipse solutions. It served the needs of the athletes when the facility was being used as part of the athletes village, and now it is easily adapted to the requirements of the incoming occupants as the space transforms into offices. Our intelligent spaces business had a very good year. We expanded our addressable market, continued our impressive growth and increased margins and now let's look forward. In our lighting and lighting controls business, we've demonstrated performance that is clearly differentiated from the rest of the market and we're not done. We are confident in our ability to grow this business and have a clear growth algorithm to do so. First, as the largest company in the North American lighting industry, we will grow with the market. Second, we will continue to take share and third, we will invest for growth by entering new verticals where we have either not historically competed or where we are underpenetrated. Taken together over a long period of time, we will we believe that our lighting business will grow mid single digits. We have also demonstrated that we can improve margins. In fiscal 2020 our adjusted operating profit margin was 15% and now in fiscal 2024 it has increased to 18%. We are confident that we can continue this trend and believe that we can add around 50 to 100 basis points of adjusted operating profit margin per year. In the lighting business, we have made ABL more predictable, repeatable and scalable. It is a high quality strategic asset and a core pillar of our company. In our intelligent spaces business, we are delivering meaningful outcomes for end users that are powered by disruptive technologies and that generate strong financial results. We are expanding our addressable market, we are growing sales and we are increasing margins. Our open edge to cloud solutions currently operate buildings to maximize occupant experience and minimize energy and operational costs and we believe we can do more in the future. We see a future where the data generated from managing a built space, from what happens in a built space, and from who is in a built space comes together in new and unique ways. Both our organic and inorganic efforts will be focused on continuing to add more disruptive technologies that bring together a new vision of data interoperability to drive end user outcomes. We have a strong pipeline of internal development and small and medium sized acquisitions to satisfy this vision. In conclusion, we are delivering better outcomes for our stakeholders and compounding wealth for our shareholders. We are continuing to drive improvements in order to make Acuity a much larger and more impactful company in fiscal 2025 and beyond. Now I'll turn the call over to Karen who will update you on our fourth quarter performance and provide the outlook for fiscal 2025.",
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          "text": "Thank you Operator Good morning and welcome to the Acuity brand's fiscal 2024 fourth quarter and full Year Earnings Call. On the call with me this morning, O'Neill Asch, our chairman, President and Chief Executive Officer and Karen Holcomb, our Senior Vice President and Chief Financial Officer. Today's call will include updates on our strategic progress and on our fiscal 2024 fourth quarter and full year performance. There will be an opportunity for QA at the end of this call. As a reminder, some of our comments today may be Forward looking statements. We intend these forward looking statements to be covered by the Safe harbor provisions of the Private Securities Litigation Reform act of 1995, as detailed on slide 2 of the accompanying presentation. Reconciliations of certain non GAAP financial metrics with their corresponding GAAP measures are available in our 2024 fourth quarter earnings release and Supplemental presentation, both of which are available on our Investor relations website at www.investors.acuitybrands.com. thank you for your interest in Acuity Brands. I will now turn the call over to Neil Asch.",
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          "text": "Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again, our first question comes from Tim Woj with Baird. Your line is now open.",
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          "text": "Maybe if I could just start with one question.",
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          "text": "Just as you kind of look at the current market conditions, obviously there's a lot of choppy data points out there. I'm just kind of curious if you can give us an update, just kind of what you're seeing around Quoting kind of ordering and release activity in the ABL business.",
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          "text": "Yeah, thanks, Tim. So, first of all, we feel good about where we're going for fiscal 25, so we're building off of. Of strength. The ABL business returned to growth in the fourth quarter. Our operating performance was very strong. As we look forward, we're reasonably confident about fiscal year 25. I think our view is consistent with most of the data that we've seen, which is that calendar year 25 is expected to be pretty strong. So the conditions now are, I would say, relatively normal, neither extraordinarily good nor bad on the ABL side. So we're focused there on the growth algorithm, and we feel good about kind of the full 25, albeit more, as Karen said, back and loaded.",
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          "text": "Okay.",
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          "text": "Okay, that's helpful.",
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          "text": "And then maybe just. You guys have built quite a cash pile on the balance sheet at this point, which is a good situation to have any kind of update on, just kind of how you're thinking about the priorities to capital allocation. I noticed you didn't really buy much stock this quarter from a repurchase standpoint. So any kind of. Just update on kind of how you're thinking about capital allocation and if any significant changes there.",
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          "text": "Karen, you want to start and then I'll follow up?",
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          "text": "Yep, sounds good. So, Tim, you know, we're really pleased with our cash flow generation. This year. We had $555 million of free cash flow, which was $44 million higher than last year. You know, we've demonstrated that we're capable with our cash flow to satisfy all of our priorities. We've invested in our current businesses for growth. We've got a healthy MA pipeline, we increased the dividend, and we did repurchase $89 million of shares outstanding. So on the share repurchases, you know, at the beginning of the year, we did provide you with expectations that we would repurchase about 40 to 60 million shares this year. So at the midpoint, we bought back about 80% more than we expected to, and we did it at an average price of around $194 a share. So we feel good about all of the repurchases this year and how we executed there. And so then I'll let Neil talk more about the M and A pipeline.",
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          "text": "Yes, and before I do that, Tim, I'll just build on Karen's point. I think the takeaway of our cash generation and balance sheet is that we have the capacity to do it all. We have the capacity to invest for growth in our current businesses. Which we've demonstrated through the refueling and horticulture vertical and the continued expansion at isg. We have increased our dividend, we've repurchased shares, as Karen pointed out. And then as we look forward, we believe we have a strong pipeline of opportunity of small and medium sized acquisitions to grow both of our businesses. Our priority is around isg and we believe that both our organic and inorganic efforts will continue to be directed towards developing and acquiring disruptive technologies that have the opportunity to bring data together in new and interesting ways that deliver end user outcomes. And so. But I think the core takeaway is that we believe with our performance and our balance sheet that we can do it all from a cash perspective.",
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          "text": "Okay. Okay, sounds good. Good luck on the year. Thank you.",
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          "text": "Thank you.",
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          "text": "Our next question comes from the line of Christopher Glenn with Oppenheimer and Company. Your line is now open.",
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          "text": "Hi. Thanks. Congratulations on strong results all year. And I was curious for an update on Design select, how the reception's going there and the independent agency adoption to it. Any variation of trends across their early adopters or laggards?",
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          "text": "Yes. Thanks, Chris. So big picture, we're really pleased with the way the portfolio segmentation is going. So the Contractor select portfolio has performed exceptionally well. We obviously have the made to order portfolio. And now as we kind of dig in on Design Select, Satch and I were on the road over the course of the last couple weeks. We met with distributors and agents and the reaction is universally positive. Their hope for us is that we bring more and more of our product families into the portfolio. So big picture, it's a lot more effective for, for each of them to ensure that they're ordering the right things for the project, that they're specing, and that our continued increased performance and service levels makes everything better for them, makes them more profitable, makes distributors more profitable and allows them to choose us. And so on the agent side, the reaction has been incredibly positive. Distributors want more of it faster and. And we're going to continue to methodically churn it out as we meet our internal targets for product vitality and service performance.",
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          "text": "That certainly sounds good. And just you mentioned DC Projects data center for the ISG segment and I don't recall you calling that out in the past. So just curious, you know, how much of a driver that vertical is in fiscal 25. Anything on win rates pipeline and how that is is that selection process for Distech is rolling around, rolling ahead.",
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          "text": "Yeah. So we obviously had an exceptional quarter on that front last quarter. If we take two steps back on kind of data center control, there's digital control and then there's pneumatic control. We are basically the leader in digital control. So for the, for the scalers who use digital control, we are the choice. And so that's what's the driver behind that. So it's been a part of our business for the last several years. We just had a really, we had a really good quarter this year that obviously that portion of the business will continue to grow both in the U.S. and in some of the markets outside the U.S. thanks.",
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          "text": "And I'll wrap up with the housekeeping question. 8 million miscellaneous expense, just context, timing of that.",
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          "text": "Yeah. So the miscellaneous expense, there's a couple things that fall in there. One is our pension expense, which is pretty consistent quarter over quarter. The big mover this quarter was really around foreign currency movements, and that's primarily due to two areas. One is the cash that Distech generates, which is significant. And so we had some foreign currency movements on the Canadian dollar, and then the other would be around our lease liabilities in Mexico and we had some unfavorable movements there. And that's what you saw. So when you look ahead, it really depends on what the FX rates are doing. And then we're working to manage our cash effectively.",
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          "text": "Thank you. Our next question comes from the line of Joe O'Day with Wells Fargo. Your line is now open.",
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          "text": "Great, thank you.",
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          "text": "Hi, good morning, everyone. Thanks for taking my questions. Neil, wanted to start just in terms of any additional color tied to your commentary around calendar year 2025 is expected to be pretty strong. Any of the contributors there with respect to interest rates or what's been a prolonged period of time with maybe more muted activity and starting to see that shift, but any of the drivers and confidence behind that. And then related to that, when you talk about the growth algorithm within lighting and kind of looking at something in the. If it's mid single digits through cycle, just how you break that down in terms of market growth outgrowth price for some perspective there.",
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          "text": "Yeah, sure. So first on the economy, CEOs are notably terrible economists, so. So this commentary is worth what you're paying for it? I would say we do a fair amount, however, of data analysis and our data analysis, trend analysis continues to be consistent, which is that there will be. There is a fair amount of activity on the horizon generally, I'd say I mentioned Satch and I were traveling with agents and distributors and what they would say is that they are very busy, but projects aren't releasing as consistently or as they Will So in other words, there's stuff building up in the pipeline we're obviously going to work through. We were things like we were in, I'll take one market for example. We were in Chicago and there's been obviously a significant decrease in on the one hand, office space that's been put back, on the other hand, a slowdown in warehouse. But the consumption focusing on warehouse for a second has to turn because they're going to reach a low point in capacity. So these things will work themselves out. And so over the longer term we feel really good about that. So then transitioning to the growth algorithm and I'll answer each of your questions. So the first is we're the largest in North America, so obviously we're going to in some manner be tied to the performance of the industry. So that's kind of step one. The second is our performance is clearly differentiated from any other lighting company that we can identify in North America and frankly anywhere else. So we will continue to take share. And third is despite the fact that we are the largest and we are taking share, there are other verticals within the North American lighting industry where we have been either chosen not to compete or are under penetrated. So we spent a minute on refueling, for example, and I will focus on that. We literally had no business zero in refueling as of 12 months ago. We created a new canopy product portfolio that meets the needs of gas stations and convenience stores and QSR restaurants. We signed up the largest agent independent agent in the network and we are going to prosecute that opportunity. Opportunities like that can be chunky as they add to, as they add to the portfolio. So we feel good about the mix of those three things. So we're confident that whatever the lighting industry growth is, we will outgrow it. And then finally on the strategy on price. So we believe that we through our product vitality efforts and through our service, we are delivering more valuable products and services to, to the industry and we will get paid for that. So we have a strategic pricing strategy which allows us to focus on continuing to one, deliver that value to the lighting industry. So they will continue to reap the benefits of that. At the same time we can continue to earn higher margins. So we feel really good about kind of where ABL is positioned now as we look, look forward to the next kind of three to five years.",
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          "text": "I appreciate all the color and then also just wanted to ask on the east coast port situation, just any color on your exposure there, your approach to kind of managing the situation. Not sure if there's Any sort of buffer inventory that you're looking at and how you think about sort of timeline before it could convert to any challenges for your operating model.",
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          "text": "On the west coast ports. Most of our products come into the west coast ports. So we do ship a few specific products from the east coast. But depending on how long it lasts, we feel pretty good about where we are from an inventory position on those ports specific products so that customers won't be impacted. There could be some secondary impact as volumes move to the west coast, but we don't believe we should be materially impacted at this time and are just continuing to monitor the situation.",
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          "text": "Got it.",
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          "text": "Thank you.",
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          "text": "Thank you. As a reminder to ask a question at this time, please press star 11 on your Touchstone telephone. Our next question comes from Brian Lee with Goldman Sachs and company. Your line is now open.",
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          "text": "Thanks for taking the questions. I guess. First one, just as I think about the different segments and channels, the independent sales network obviously a big one for you guys. Back to growth, first time in over a year. Plus are you seeing a true inflection in trends there? Maybe kind of speak to the outlook for that business and if you can help bracket what you think growth scenarios look like for that specifically in 25. Is that flat up, low, single, mid single? Just trying to get a sense specifically on that part of the business.",
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          "text": "Yes. Brian, thanks for joining. I would just build on my answer to Joe there. So from a trends perspective, as Karen said, we expect the lighting business generally to be in the low to mid single digits growth this year which is more skewed towards calendar year 25. I will take a minute to outline and emphasize the power of our independent sales network. So I haven't talked about that in a while but it's worth taking a step back and reflecting on that. It's round number 60% of our lighting business. We have about 80 agents in North America. They have about on average 50 FTEs. So we have 4,000 sales support professionals throughout North America selling our products. We are generally number one in each market in which we compete. They are generally number one in each market they compete and the symbiotic relationship between them and us is really strong. So going all the way back to when I first got here and we immediately kind of went into the pandemic and all of the mishigash or the of the global supply chain stuff that followed that, our agent performance, the performance of the independent sales network has been very consistent. So they're continuing to perform for us and are an important part of our growth and as I mentioned, as we've been out on the road talking to them, they're working very hard, they have a lot of activity right now. Projects are a little slow to release, but they will over time. So taken together that kind of. They are a contributor, but not the only contributor to our expected continued kind of mid single digit sales growth over a long period of time on the lighting business.",
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          "text": "Okay, super helpful. And then maybe just question on the gross margins. If I look at the fiscal 25 guidance here, it kind of implies if our numbers are right, gross margin essentially flat on a percentage basis with fiscal 24, where you obviously had very good performance on that metric. So is it fair to assume the additional margin leverage in fiscal 25 is coming more at the operating level? And then as we think about that, just maybe contextualize the long term target for 50 to 100 basis points annually. Is that going to be a split between ongoing gross margin leverage and at the OPEX line, or is it more going to be shifting toward kind of leverage on the OPEX line like it seems like it could be for 25?",
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          "text": "Yes. Thanks for the question. Let me kind of highlight a couple things on that. First is it's fair to say that our gross margin performance has been incredibly strong over the the last several years and we don't think that that's going to abate. So the second on the OPEX line is that we have some geographic changes. So for example, as we invest in technology to help power the gross margin improvement, that technology investment shows up in sdna. As we now focus on operating profit margin and the combination of those two, we think the 50 to 100 basis points annual target can continue for the foreseeable future. It will be a mix of those two, so it won't be perfectly linear in any specific period. But we believe that we have opportunities in both areas. We have the opportunity to continue on gross margin expansion to varying degrees and different years. And we believe that we have the opportunity to leverage OPEX as we continue while we still continue to invest to drive the higher margin. So taken together, I really wanted to use this opportunity to highlight how powerful our lighting business is. It is clearly a top performer in its industry. We have demonstrated that both we can outgrow the industry and we can continue to expand margins. So. So it's a strategically valuable industry leading asset for us for the long term.",
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          "text": "All right, thanks a lot. I'll pass it on.",
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          "text": "Thanks.",
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          "text": "Thank you. And I'm showing no further questions in the queue at this time. I'd like to turn the call back to Neil Ashe for any closing remarks.",
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          "text": "Great. Thank you all for joining us today. We're very pleased with the performance in our fiscal 2024. It was incredibly strong. As we look forward to FY25, our lighting business will continue to be the industry leader. That business will grow. We have a clear algorithm to do that. We will continue to expand margins there for the foreseeable future. And we're excited about the opportunities in our spaces group as we continue to deliver disruptive technologies that stitch data together in new and interesting ways to drive end user outcomes. We feel like we can continue to expand what we can control and where we can compete and we're excited about that possibility. And finally, all of that delivers incredibly strong cash generation for us to use capital allocation to drive value for stakeholders and compound wealth for our shareholders. So we're looking forward to the year ahead and the year after that and the year after that. So thank you for being with us this morning and we'll talk to you again in another quarter.",
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          "text": "This concludes today's conference call. Thank you for your participation. You may now disconnect.",
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  {
    "call_id": "Visa Q3 24",
    "call_title": "Visa Q3 24 Conference Call",
    "symbol": "Visa Q3 24",
    "start_time": "2025-01-08T22:15:53Z",
    "end_time": "2025-01-08T22:16:01Z",
    "duration": 0,
    "status": "COMPLETED",
    "created_at": "2025-01-08T22:15:53.943446Z",
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      "call_id": "Visa Q3 24",
      "text": " Welcome to Visa's fiscal third quarter 2024 earnings conference call. All participants are in a listen only mode until the question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host, Ms. Jennifer Cuomo, Senior Vice President and Global Head of Investor Relations. Ms. Cuomo, you may begin. Thank you. Good afternoon everyone and welcome to Visa's fiscal third quarter 2024 earnings call. Joining us today are Ryan McInerney, Visa's chief executive Officer, and Chris Suh, Visa's Chief Financial Officer. This call is being webcast on the Investor Relations section of our website@investor.visa.com A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights has been posted on our IR website. Let me also remind you that this presentation includes forward looking statements. These statements are not guarantees of future performance and our actual results could differ materially as the result of many factors. Additional information concerning those factors is available in our most recent Annual report on Form 10K and any subsequent reports on Forms 10Q and 8K, which you can find on the SEC's website and the Investor Relations section of our website. Our comments today regarding our financial results will reflect revenue on a GAAP basis and all other results on a non GAAP nominal basis unless otherwise noted. The related GAAP measures and reconciliation are available in today's earnings release and related materials available on our IR website. And with that, let me turn the call over to Ryan. Good afternoon everyone. Thank you for joining us. We delivered strong third quarter results with $8.9 billion in net revenue up 10% year over year and EPS up 12%. Our key business drivers were relatively stable as compared to Q2 adjusted for Leap year in constant dollars. Overall payments volume grew 7% year over year, US payments volume grew 5% and international payments volume grew 10%. Cross border volume excluding intra Europe rose 14% and process transactions grew 10% year over year. We recently received the results from our annual Global Client Engagement Survey where Visa achieved a Global Net Promoter score or NPS of 76, up three points from last year. We saw NPS increases across all of our client types, merchants, issuers, fintechs and processors and across our regions. The results remain Strong with a notable 6 point NPS improvement in North America. I want to thank all of our 30,000 employees who helped deliver these fantastic results and as I review some highlights from the quarter, you'll see how this focus on serving our clients by meeting their needs, innovating and helping them grow is fueling our success across consumer payments, new flows and value added services businesses. Let's start with Consumer Payments where we see more than $20 trillion of opportunity to capture cash, check, ach, domestic schemes and other forms of electronic payment. In our Client Engagement survey, our clients ranked our strategic partnership and our brand as two of the most important factors to our successful relationships. I'll share some examples of how each of these played out this quarter. In strategic partnerships, we are constantly seeking ways to add more value and grow together with our clients. We are pleased to have been named the Preferred Network Partner by Lloyd's Banking Group, renewing our debit relationship and significantly expanding our relationship in credit, winning 10 million additional credit credentials across the group's consumer and commercial business. Also in the UK, NatWest has launched a new Visa Travel Reward credit card following the signing of our partnership last year. They will also be utilizing many value added services including transaction controls and card benefits. On the European continent, we work with Rafeisen Bank International ag, a leading bank in several markets. Recently in the Czech Republic and Romania we renewed our commercial business and expanded our consumer debit and credit business totaling over 2 million potential new credentials. In Korea, we deepened our partnership with leading issuer KB koopmancard, already a user of Visa Direct Cross Border Money Movement and a Visa consumer and commercial issuer. They will grow their consumer credit and debit portfolios with Visa and use value added services including consulting and marketing services. In Peru, we extended our partnership with leading issuer Banco de Credito de Peru across consumer and commercial portfolios with plans to launch additional new flows, offerings and value added services. In the US we extended our agreement with Wells Fargo. This will allow us to continue to support Wells Fargo's strategy to reinvent their credit business and provide additional growth by leveraging key Visa assets like consulting and Visa sponsorships such as FIFA and the Olympic and Paralympic Games. On the brand front, with the Olympic Games opening ceremony later this week, it is exciting to see the engagement with the Visa brand and activation across the world in marketing campaigns, cardholder experiences and Olympic and Paralympic branded Visa issuance which I am happy to report in Europe is at nearly 6 million cards compared to the 5 million number I quoted just last quarter. We have also added nearly 100,000 new merchant locations in France in advance of the event. Our brand also plays an important role in winning co brand partnerships in India. Growing credit issuance and reaching affluent and cross border consumers remain areas of focus. We are excited about the launch of A co brand card with Adani One and ICICI bank as India's first co branded credit card with Rich Airport linked benefits for their Target base of 400 million customers through the Andani One platform. We also signed an agreement to launch a new co brand card with Tata Digital along with an Indian banking partner building on the success of our existing credit co brand relationship. This new co brand offering consists of a multi currency prepaid foreign exchange card that will target travelers from India. Also benefiting from the rewards of the Tata Digital super appeal tatanu. Across seven countries in Latin America we will work with unicomr, a major retailer and financial services provider with numerous brands to deliver a co brand credit card. In addition to using cybersource and in Samiya, we reached a De novo co brand arrangement with Bin Dawood, a leading grocer in the Kingdom of Saudi Arabia with 88 outlets and over 5 million loyalty program members. On the travel side, we extended our relationship with Malaysia Airlines from a prepaid co brand card targeting millennials and Gen Z customers to also launch a new co brand credit card for the travel minded, affluent and in the US Turkish Airlines has chosen Visa to be their exclusive network partner for their new Miles and Smiles co brand credit card. Our consumer payment strategy is focused on growing credentials as we are doing across all the partnerships I just mentioned and increasing acceptance. Locations and wallets are a great example of where this comes together, where Visa can be a funding source, an embedded credential and an accepted form of payment by wallet merchants. This increases the value proposition for wallet providers and their users. 2 Wallet highlights this quarter are in Peru and Vietnam. Yape is a Peruvian super app with more than 15 million users who already have a Visa credential that enables them to Send money across P2P apps via Visa Direct and just recently they launched Tap to Phone functionality for their more than 2 million merchants to accept Visa. And in Vietnam, a country with approximately 50 million wallet users, the three leading digital wallets, Momo, Vinpay and Zalopay are now enabling their users to utilize Visa cards as a funding source for transactions at over 500,000 QR acceptance points managed by these wallets. One additional area that we are very focused on is delivering simple, easier, easy and secure checkout experiences. Let me share a few recent examples. First, we are integrating Click to Pay and the Visa Payment passkey service, enabling a customer to authenticate themselves using biometrics. Already we have hundreds of issuers enabled for passkeys in Europe and a number of issuers who represent more than 50% of our E commerce payments volume in Europe. Piloting the solution second, we crossed 10 billion tokens this quarter, a significant milestone and in 2023 alone, Visa tokens helped generate more than an estimated $40 billion in incremental E commerce revenue for businesses globally and saved more than $600 million in fraud. Third is the ability to tap for more use cases on a mobile device. With tapping as one of the best in person commerce experiences, we want to provide Visa users with more ways to tap, including TAP to pay, Tap to authenticate an identity, Tap to add a card or TAP to send money to family or friends and finally this quarter Tap to pay grew 4 percentage points from last year to 80% of face to face transactions globally excluding the U.S. in the U.S. we surpassed 50% and have 30 U.S. cities above 60% penetration. Now moving on to new flows this quarter New flows revenue grew 18% year over year in constant dollars with Visa Direct overall transactions growing 41% for the quarter to 2.6 billion and commercial volumes up 7% year over year in constant dollars. Let me provide some Updates starting with B2B where we have focused on penetrating new verticals and delivering innovative products and solutions in healthcare. We will work with AXA and PA Share to launch a commercial virtual card solution to simplify the claims processes for their customers worldwide. We have also expanded our virtual card acceptance with a key business services provider, Cintas, who offers uniform safety and fire protection services to over 1 million customers. Together with our partner Bill Trust, we will help Cintas streamline their payments, automate processes and manage costs on Bill Trust's Business Payments network or bpn. We also just recently extended our long standing BPN collaboration with Bill Trust that connects suppliers and buyers to facilitate straight through processing of virtual card payments with rich data that optimizes acceptance costs. Our products and solutions in B2B remain very important in winning and growing our business. One such solution is the enhanced B2B data that we can provide in Brazil. Together with Celero, a leading business financial management solution, we will provide issuers with enhanced visibility into small business spend by aggregating data across cards, bank accounts, bolettos and more, enabling them to better manage their client relationships and offer compelling products. Another solution is Spend Clarity which provides expense program management including card issuance controls and reporting. Wells Fargo has white labeled our solution called Wells One Expense Manager which has now onboarded 6,000 corporate clients representing over 1 million users providing access to their spend data. Now moving on to Visa Direct, we continued to grow our transactions through expanded and new relationships over the past year, total Visa direct cross border P2P transactions have nearly doubled with Europe and Semia being the largest regions in Semia. We are very excited to have renewed our Visa direct relationship with FinTech Mono Bank. In addition to renewing their consumer and commercial credit, debit and prepaid portfolios in Asia Pacific, we are partnering with China Zhongsheng bank on cross border capabilities including Visa Direct and Currency Cloud, allowing the bank to support cross border payments for their merchant clients. Canadian fintech Nuvi has extended its agreement with us for Visa Direct across all cross border use cases in more than 30 countries for their merchant clients and recently became the first Visa Direct enabler in Colombia. We also executed our first global agreement with World Remit and sendwave, enabling their customers to eventually send Visa Direct Cross border remittances from 50 countries to recipients in 130 countries quickly. A leading South Asian marketplace has enabled Visa Direct Cross border remittance solutions for US Customers to send money to relatives and friends in India and the rest of South Asia. And in Earned wage access, we reached an agreement with Weaver, a UK based embedded finance provider. In addition to card issuance, they will be utilizing Visa Direct to enable Weaver's business clients to offer employee expense reimbursement, reward and recognition and earned wage access. Earned wage access provider PayActive, who serves 4,000 businesses, has renewed its agreement with us and will enable Visa plus for payouts. Similarly, we expanded our relationship with enabler Astra. In addition to domestic disbursements, Astra will now offer cross border remittances, implement Visa to reach domestic wallets in the US and expand to additional use cases including payroll, earned wage access and marketplaces. Visa is still in the early stages but is fully rolled out and live for PayPal and Venmo users and more providers continue to join the platform, wrapping up new flows. We also renewed an agreement with fis, an important issuer processing partner, to enable a suite of value added services and new flows capabilities for their clients including Visa Direct. And now on to Value Added Services where revenue was up 23% in the third quarter in constant dollars. Let me highlight some of the progress we have made in driving adoption and growth among our value added services portfolio. First in issuing solutions. One area of strong revenue growth this quarter was in card benefits where we enable our clients to offer unique value propositions tailored to their customer base in travel, entertainment, restaurants, insurance and more. Strong issuance in premium cards across most of our regions has fueled this growth. In the third quarter. For example, in Latin America, travel benefits have grown with over 370,000 unique visits to our Visa Infinite Airport lounge in Brazil, representing customers from a number of leading issuers. In addition, since its launch in 2022, our Visa Infinite Fast Pass in Brazil, which allows cardholders to get through airport security more quickly, has screened over 1 million travelers. These are among the top 5 card benefits in Brazil and deliver value to customers, issuers and Visa. We continue to add more benefits like the recently launched partnership with OpenTable to offer eligible Visa cardholders access to coveted restaurant reservations and experiences in the US with plans to expand into Canada and Mexico in acceptance solutions. Third quarter growth was driven by increasing utilization across both token and e Commerce related services in E commerce. One such example is with iFood, the largest food delivery platform in Brazil, who is utilizing our Verifi solution to help prevent disputes before they become chargebacks. In addition, they will be using our authentication solutions in Risk and identity solutions. We continue to see strong adoption by new and existing clients, driven in part by growth in card not present transactions. In North America, acquirer worldpay will be expanding their use of our authentication solutions from Cardinal Commerce, fostering collaboration and real time enhanced data exchange between worldpay merchants and issuers during card not present transactions, reducing fraud and allowing more transactions to be properly authenticated and authorized securely. We are also pleased that the pilot of our account to account risk scoring solution, visa protect with pay.uk has had great results showing an average 40% uplift in fraud detection over the three month pilot period. In addition, we are now launching Visa Protect in Argentina with a core payments technology company Coelsa, after successfully piloting the solution there as well. The last two value added services are open banking and advisory services. We continue to sign new partners with TINC in Europe and the US and as I mentioned earlier, we continue to see strong growth in client demand for our consulting and marketing services, particularly around marquee events such as the Olympic and Paralympic Games. Our Value Added services portfolio of solutions is strong and is driving meaningful growth for our clients and for Visa. Before I close, I wanted to speak to the fact that the settlement reached for the injunctive relief class was rejected by the court. We are of course disappointed with this decision. We believe that the prior settlement provided meaningful relief to all merchants and we will continue to work towards another settlement to close. So far this fiscal year we have seen strong revenue and EPS growth as a result of relatively stable volume and transaction growth. I remain very excited about the opportunity that lies ahead of us at Visa. We come to work in service of our clients and partners and are focused on building and deploying the best solutions possible across consumer payments, new flows and value added services. Now over to Chris. Thanks Ryan. Good afternoon everyone. In Q3 we had another strong quarter with relatively stable growth across payments volume, cross border volume and process transactions when compared to Q2 adjusted for Leap year in constant dollars, Global payments volume was up 7% year over year and cross border volume excluding Inter Europe was up 14% year over year. Process transactions grew 10% year over year. Fiscal third quarter net revenue was up 10% in both GAAP and constant dollars in line with our expectations. EPS was up 12% year over year and 13% in constant dollars. Now let's go into the details. In the US payment volumes, growth numbers were generally in line with Q2 adjusted for leap year with total Q3 payments volume growing 5% year over year with credit and debit also growing 5. Card present volume grew 2% and card not present volume grew 7% in the US while growth in the high spend consumer segment remained stable compared to prior quarters, we saw a slight moderation in the lower spend consumer segment. Moving to international markets. Total payments volume was up 10% in constant dollars, relatively stable with Q2 when adjusted for leap year payments volume growth rates were strong for the quarter in most major regions with Latin America, semia and Europe ex UK each growing more than 16% in constant dollars. Asia Pacific payments volume slowed to less than half a point of year over year. Growth in constant dollars for the quarter driven primarily by the macroeconomic environment, most notably in mainland China. Now to cross border volume which I will speak to today in constant dollars and excluding Intra Europe transactions, total cross border volume was up 14% in Q3, relatively stable to Q2 adjusted for Leap year. Cross border card not present Volume growth excluding travel and adjusted for cryptocurrency purchases was in the mid teens helped by continued strength in retail cross border travel volume growth was also up in the mid teens or 157% index to 2019. This quarter we saw the inbound Asia Pacific index improve 9 points at a similar pace to Q2 to 151% of 2019. The improvement in Asia Pacific outbound travel, however, slowed from Q2 with the index increasing by less than a point to 125% of 2019. We continued to see the same primary drivers as last quarter with some additional pressure from macroeconomic conditions. Now let's review our third quarter financial results. I'll start with the revenue components. Service revenue grew 8% year over year versus the 8% growth in Q2 constant dollar payments volume with revenue yield improving sequentially and versus last year due to improving utilization of card benefit data processing revenue grew 9% versus 10% Process transaction growth with the revenue yield generally in line sequentially and versus last year. International transaction revenue was up 9% versus the 14% increase in constant dollar cross border volume excluding Intra Europe impacted by lapping higher currency volatility from last year. Volatility levels remain consistent on average to last quarter. Other revenue grew 31%, primarily driven by strong consulting and marketing services. Revenue related to the Olympics and to a lesser extent pricing. Client incentives grew 11% now onto our three growth engines. Consumer payments growth was driven by relatively stable payments volume, cross border volume and process transaction growth. New flows revenue grew 18% year over year in constant dollars. Visa direct transactions grew 41% year over year helped by growth in Latin America for interoperability among P2P apps. Commercial volumes rose 7% year over year in constant dollars. In Q3 value added services revenue grew 23% in constant dollars to $2.2 billion primarily driven by issuing and acceptance solutions and advisory services. Operating expenses grew 14% primarily due to increases in general and administrative personnel and marketing expenses including spend related to the Olympics. FX was a half point drag versus the one and a half point benefit we expected. Tismo represented an approximately one point drag. Non operating income was $73 million. Our tax rate was 18.8% and EPS was $2.42, up 12% over last year inclusive of an approximately one and a half point drag from exchange rates and an approximately half point drag from Pismo. In Q3 we bought back approximately $4.8 billion in stock and distributed over 1 billion in dividends to our stockholders. At the end of June we had 18.9 billion remaining in our buyback authorization. Now let's move to what we've seen so far in July through the 21st with volume growth in constant dollars. Cross border is excluding intra Europe. US payments volume was up 4% with debit up 4% and credit up 3% year over year. This slight deceleration from Q3 does not appear to be from any one factor, but likely a number of smaller factors such as weather, timing of promotional shopping events and the technology outage among others. Cross border volume grew 13% year over year below Q3 levels with travel related volume growing slightly less which continued to be impacted by Asia Pacific and Card not present X Travel volume growing at similar levels to Q3 process transactions grew 9% year over year. Now onto our expectations. Remember that adjusted basis is defined as non gaap, results in constant dollars and excludes acquisition impacts. You can review these disclosures in our earnings presentations for more detail. Let's start with the fourth quarter. We expect payments volume and process transactions to grow at a similar rate to Q3. For total cross border volume growth, we are expecting to end up slightly below Q3. Currency volatility continues to average around 4 year lows through July 21st and as such we are making an adjustment to currency volatility expectations for Q4. Now, assuming volatility will stay in line with Q3 levels, incentives are expected to be at their lowest growth rate all year. Pulling it all together, we expect adjusted net revenue growth in the low double digits, which equates to a slight improvement from the 10% adjusted revenue growth rate in the third quarter. We expect our Q4 adjusted operating expenses to grow in the high single digit non operating income is expected to be between 40 and $50 million. The tax rate is expected to be between 19 and 19.5% in Q4, which puts Q4 adjusted EPS growth rate in the high end of low double digit moving to the full year. With 3/4 now complete, our expectations for full year adjusted net revenue growth remain unchanged from what we shared at the start of the year. While absorbing the impact of lower currency volatility and the macroeconomic challenges in Asia which have affected volumes, we still expect to reach low double digit adjusted net revenue growth for the full year. Full year adjusted operating expense growth will be in the high single digit to low double digits, reflecting the less favorable impact of fx. This keeps full year adjusted EPS growth in the low teens. In closing, we delivered strong results this quarter with new flows and value added services revenue growing faster than consumer payments. We extended our existing relationships, won new clients and invested to develop innovative products and solutions, all positioning us for continued growth into the future. But now Jennifer, it's time for some Q and A. Thanks Chris. And with that, we're ready to take questions. If you would like to ask a question, please press Star one and clearly record your name. You will be announced prior to asking your question. To ensure all questioners are heard, we ask that you please limit yourself to one question once again. To ask a question, please press Star 1. To withdraw your question, press Star 2. Our first question comes from Darren Peller from Wolf Research. Please go ahead. Hey, thanks guys. Look, let me just start. The US volume growth rate obviously is a bit softer and if you could help us distill what you consider structural versus you know, cyclical. I think that'd be a good place to start. But adding onto it really is just the ability for you to grow double digit revenue with only 4, 5, 6, you know, mid single digit US volume growth is coming from value Added Services. It's coming from cross border. Can you help us understand if that kind of trend, you believe the company has that capability to grow those rates on revenues even in this context of US volume trends? Thanks guys. Yeah, hi Darren. So let me start with the U.S. let me start with the first part of your question and then we'll maybe get into zoom out and talk about maybe the longer question. So in the US in Q3 we did see stable drivers relative to Q2. Once you adjust for leap year, that's 5% payment volumes growth in the third quarter. In the 21 days since in July that number did tick down to 4%. Maybe I'll just sort of give you the full arc of what we're seeing. So 4%. Let's just level set on those numbers. 4% in the 21 days versus 5% in Q3. And so for that we did stare at a lot of the drivers, the factors that impacted those three weeks. And there was a lot going on and I referenced a few of them on the call and maybe I'll expand on those a bit. First we had a major hurricane, Hurricane Beryl and impacted Texas and other parts of the US nearby. The second, I referenced the timing of promotional E commerce events. Maybe I can expand on that a little bit. The timing this year was later and in E Commerce customers are billed when the goods are shipped. And so some of that shipping period fell out of that 21 period. So we had a little bit of difference in the 21 day period to the comparable year ago. And third, obviously the major tech outage that happened at the end of last week that also had some impact. So when we look at that, no single fact drove that one point of change from Q3 to the first part of July. But you know, all things considered, we actually feel pretty good about the three week results. Now the second part of your question really was around, you know, sort of the low double digits in the context of cross border VAs and CMS. I'll sort of back into the question. We've had consistent strong performance in VAs, over $2 billion of revenue, over 20% growth for many quarters consecutively. And we're seeing strength across, across the business in issuing solutions and acceptance and advisory. That's a business that we feel great about the momentum in with our new flows business. 18% growth as Ryan talked about in the quarter, that's the second quarter in a row where we're seeing growth in the teens. Great execution, stable volumes and Visa Direct transactions growing at a high level. As you know, that business also, you know, quarter to quarter can vary a little bit in the growth rates as we saw in the first half of the year. But all in all feel really good about the continued strength in that business. And then cross border. Well, cross border maybe I'll just zoom out a little bit and talk about cross border and what we've seen over the course of time. If you recall, pre pandemic cross border grew, you know, travel grew sort of in the high single digits to low double digits and E Commerce, which was about a third of the business grow, grew into the teens, sometimes into the mid teens. Obviously the pandemic happened, travel really contracted, E commerce grew faster and since then, now post pandemic what we're seeing now is that E Commerce is roughly 40% of the business and the growth rate has normalized. It stabilized back to pre pandemic levels. And so let's say teens growth on e commerce on 40% of the cross border business travel after the post pandemic. Run up has normalized. It's a little hard to tell exactly where it's going to stabilize at. But we've seen high growth, we've seen it continue to normalize. But what we do know structurally is that with E Commerce being a bigger portion of the business at the tailwind to the total cross border growth. And so you know, we are confident that that will continue to be healthy relative to the domestic spend. I'll pause there and certainly if there's anything else to add, Ryan or others, please jump in. No, nothing to add from me, Chris. Thanks, Darren. Next question please. Next we'll go to the line of Andrew Jeffrey from William Blair. Please go ahead. Hi, good afternoon. Appreciate you taking the question. Very impressive value added services growth this quarter at 23%. And I think as you mentioned, Chris. It'S approaching 25% of total revenue. So perhaps driving more than half your consolidated revenue growth. Can you talk a little bit about at what point we might expect value. Added services to sort of bend up the growth curve of Visa Consolidated. You know, it's Ryan, Andrew, thanks for the question. And yeah, we're very excited about not only what we delivered in terms of value added services growth for the quarter, what we've been delivering consistently for several years now since we shared with you all the strategy and kind of became very purposeful about our go to market approach, I mean go back to, I think it was 2021, we did about $5 billion in revenue. 2022, 6 billion. Last year was 7 billion. Like you said, we did 2.2 billion this quarter, up 23%. So I think what we've shown is that we have delivered cons consistent growth quarter after quarter and year after year in these businesses. And we're super optimistic about where we go from here. I mean we think about, you know, we think about the opportunities really in three different segments. You know, the first is we have a series of value added services, some of which Chris outlined in his previous answer, that are very focused on enhancing value for Visa transactions. You know, risk products like Visa secure dispute tools like Visa Resolve, online card benefits, like I mentioned in my prepared remarks. And we've that has historically been the largest part of our value added services business. And we've shown that we can drive. Great growth in that area. Increasingly we're building out a set of services that add value for non visa transactions. You know, we've done some things in this space before, you know, some of our platforms like CyberSource, Authorize.net, verifi. But then you've heard me talk in the last couple quarters about expanding our risk capabilities, for example to not just other card networks, but also to RTP and account to account services. And I mentioned the great results we've had in both the UK and in Argentina on that front. And then the third area of opportunity for us is expanding our value added services beyond payments. Historically we've had things like Visa consulting and analytics and our marketing services and some of the open banking services delivered by Tink. But we're continuing to build out a. Portfolio of value added services for our clients and partners beyond payments, things like the cyber protection capabilities that we've been bringing to market. So we've demonstrated consistent growth. We believe we'll be able to continue to demonstrate consistent growth. We've got a product pipeline and a go to market approach all over the world with a diverse set of clients and we feel good about the opportunity. Next we'll go to the line of Brian Keen from Deutsche Bank. Please go ahead. Next question please. Hi guys. Good afternoon. Chris. Just want to ask about incentives being the lowest expectation will be for the fourth quarter. Can you just talk a little bit about how much of that is volume driven versus the amount of renewals you're seeing. And just trying to think about as we head into next fiscal year, just. What kind of growth or sustainable growth. Should we think about for incentives? Thanks. Thanks for the question. You know, I'll even take us back a little bit about the expectations that we had for incentives coming in to the fiscal year as we ended fiscal 23, that was a high year for us in terms of volume of renewals, a little higher than our typical sort of normal cadence. That did impact how we thought about the incentive volumes in FY24. And even last year, we had sort of a different growth rate in the first half and the second half of the year. And so as we looked across this year, we had a slightly lower volume of renewals this year. Obviously, year to date, incentives have played out slightly differently, largely due to client performance, deal timing, things like that. And overall it's been better than. It's been lower, I guess, than what we anticipated. When we go into Q4, sort of the same trend applies. We still expect Q4 to benefit from the lapping of the high incentives that we saw in the second half of last year, which informs again, the growth rate that we anticipate in Q4. We don't have a lot to share about FY 2025 at this point, but we'll share plenty in the next earnings call. Next question, please. Next we'll go to the line of Ken Sahowski from Autonomous Research. Please go ahead. Hey, good afternoon. Thanks for taking the question. I wanted to ask about bas, and I think the team has talked about how some of the VAS revenue is correlated with transaction growth, but you also have parts of that business that are more recurring or less recurring in nature. So can you just help us understand how you think about the cyclicality of vaas and how that business might perform in a lower volume growth environment? And I also think the team has talked about pricing for value in vast. So how much more room is left to go there and how does that help with the resiliency of the business? Thank you, Ken. It's Ryan on the second part of your question. You know, our ability to price for value is a function of the value that we bring to the market. And we feel great about the value that we're bringing to the market. And I think you see it in our results, you know, across the various different areas of issuing solutions, acceptance solutions, risk and identity solutions, advisory. I mean, we just continue to bring products and services that are ultimately helping our clients grow their business, helping our clients reduce fraud, grow authorizations, those types of things. And we believe we'll continue to do that and we believe we'll be able to continue to price for value. As I think I was saying earlier, the biggest portion of our value added services are a function of Visa transactions. And so, you know, obviously Visa transactions, as they go up or down, have an impact on that, but so does our ability to sell more services. You know, on previous calls, I've talked about the fact that we still have the majority of our clients that have yet to have the type of penetration and depth that we've been able to achieve with others. So as we continue to penetrate our clients all around the world and in the various markets that we deliver, as I was saying earlier to the earlier question, I'm very optimistic about our ability to continue to grow this business as we have. Next question, please. Next we'll go to the line of Tianjin Huang from JPMorgan. Please go ahead. Hey, thanks. Good afternoon. Just curious if you're, if you've updated your US outlook here in the second half, are you still expecting transaction sizes to accelerate in the U.S. especially here in the fourth quarter? Hi, Tinjin, thanks for the question. Yeah, we had forecasted ats, as, you know, growth to improve throughout the pace of this year from quarter to quarter. And we did see that. We saw ATS improve in the third quarter, specifically in the US ATS was slightly better in Q3 than in Q2. It got to basically flat year over year. In Q3, we saw improvement in a number of categories sequentially. Restaurant, qsr, fuel, telecom, utilities, insurance, to name a few. And we do anticipate in Q4 that we'll continue to see slight improvement sequentially. Again, you know, the one thing, the one watch out, I'll call out is fuel prices could impact that trajectory. And so we'll watch that closely. So, yeah, it is playing out as we anticipated. The pace is slightly varied from what we anticipated, but it is continuing to improve and I think that's the important thing. Next question, please. Next we'll go to the line of Gus Gala from Moness, Crespi and Hart. Please go ahead. Hi guys. Thank you. Can we talk a little bit about the contactless payments penetration? Can you maybe highlight maybe what the gap is in penetration rates across maybe some of your older card holders, young. Cardholders, just trying to get around to what a terminal level of penetration could look like. Thanks. You're asking, I heard you're asking about Tap to pay. Yes. I mean, yeah. I mean, just back up first in the big picture of things, you know, the fact that outside of the United States, 8 out of 10 of all the visa face to face transactions around the entire planet are tapped to pay now. I mean, that just tells you right there that it's all segments, all demographics, all use cases, all product types. I mean, you know, we're at 80%. Overall around the world. We've got, I think more than 55 countries that are now more than 90% contactless penetration. So increasingly in most countries, for most customers, for most products all around the world, that's just the default way that people are paying. And in the US the curve is maturing exactly how we'd expect it based on what we've seen in, you know, 100 plus countries all around the world. You know, as I said in my prepared remarks, now one out of every two transactions in the US are taps in a place like New York City where many of you on the call spend time. We're above 75% now. So in New York City, where was one of the early adopters of transit, we're up, we're above, I think 75% plus of all face to face transactions. That's up from just 50% two years ago. So again, at that level of penetration. In a market the size of New. York City, it's across the board in terms of products and issuers and segments and the like. So I think as we continue to see this growth happen, you know, buyers, sellers, they love tapping as a way to pay and we're going to continue to see that growth accelerate in a place like the U.S. next question, please. Next we'll go to the line of Will Nance from Goldman Sachs. Please go ahead. Hey guys, thanks for taking the question. You know, we've been getting a lot of questions around the litigation updates and you know, I totally understand the level of uncertainty is a lot higher now, but I guess the most common investor question that we're getting is around the potential impacts to the overall ecosystem if we see a much greater reduction in interchange rates than what was proposed and I guess specifically how the reduction in interchange rates could reverberate through renewal negotiations with issuers and then longer term how this may impact the trajectory of incentives and net yield. So just wondering if we could hear kind of your perspective about, you know, the potential reduction or a larger reduction in the overall size of sort of ecosystem revenue and you know, if that changes the direction of any of the key indicators that we're focused on over time. Thanks. Hey, well, thanks for the question. And you know, you're asking about the MDL litigation. You know, I Guess I'll just back up. You know, the first thing I would say is we strongly disagree with the judge's decision. We believe the settlement was fair. We believe the settlement provided meaningful relief to all merchants. You know, the second thing I would say is the decision failed to take into consideration a number of things, especially the complex multisided ecosystem that we operate in, the role that, the complicated role that many different players in the ecosystem deliver. But having said that, we're pursuing a revised settlement. It's too early to speculate on what that settlement is, so I won't do that today. But I would ask everybody to keep in mind, you know, a settlement can occur at any point before, during or even after the trial. So just keep that in mind as the process plays out. Next question, please. Next we'll go to the line of Timothy Chiodo from ubs. Please go ahead. Great. Thanks for taking the question. I want to hit one that at. The same time tackles both incentives and. So it's concept of value in kind incentives. Value added services revenue. I was hoping you could talk a little bit about whether or not these are becoming more prominent, meaning you're using. Them a little bit more in discussions with issuers. And then if you could just briefly. Recap some of the mechanics around the revenue recognition, the contra revenue, the addition to deferred revenue, and then eventually the. Value added services revenue. Thanks a lot. Yeah, I'll just give you the high level on this. You know, the value in kind is a great way for us to, as it says, to deliver value to our clients. And increasingly our clients, as you see in our performance, are preferring to buy our value added services versus just take incentives that might drop to the bottom line. So that is absolutely something that our clients are asking for more of. It's something that is helping our clients grow their businesses. And you know, I talked earlier about just the last several years about, you know, our product pipeline, how we've gone to market, how we've built new products and solutions and services for our clients, you know, and that's what's driving the demand. So, you know, that's kind of become a more important part of our client renewals and our client renewal discussions. And you know, increasingly value added services are becoming a way for us to differentiate ourselves with our clients and grow our consumer payments business. Yeah, you want to talk about the. Tim, to the second part of your question, maybe I'll just give you a high level summary. You know, I think you have sort of the pieces you called out, you know, at A high level. When value in kind is offered in lieu of a cash incentive, it can it would be recognized as a contra revenue at the time that it's granted or earned depending on the nature of the contract. And then on the other side when the client is able to utilize that value in kind for services from Visa. Commonly in our value added services business, that's then recognized as revenue and the associated costs are also recognized in our. Next we'll go to the line of James Fossett from Morgan Stanley. Please go ahead. P and L. Next question please. Thank you very much. I wanted just to ask a follow up question on near term trends. We've seen a little bit of or further slowing in credit than in debit. Great. Over the last couple of months and. Let me just give a little context on it and then Chris, feel free to add or correct. Like Chris said, we're three weeks into the quarter. We had a hurricane, we had a tech outage across the country. We had a number of things happen. So we're not kind of taking three weeks as a trend. We'll see kind of how things progress from here in just terms kind of what happens for the rest of the quarter. In the past that's been a little bit of an indication of consumer stress. And I'm just wondering how you're thinking about that. And it seems like you're looking for the rest of the September quarter that there's a little bit of a re acceleration as we get past some of the issues that you identified in July. Just want to make sure that I'm understanding that correctly and kind of how we should interpret a little bit of the divergence in credit and debit growth right now. Thanks. I don't know. You want to talk about the credit debit divergence? Yeah. Well, I think I'll refer back to a little bit of the comment that we made and we're seeing the July results. I also commented on the call that we are seeing a little bit of moderation in what I would call the lower spend band quote cohorts. And I think that's a little bit correlated to some of the volume, you know, volume numbers that we're seeing in the quarter related to credit versus debit. But all in all, when we look at it relative to again Q2 and Q3, we see it to be relatively stable once you factor in sort of the day's mix with leap year. Next question please. Next we'll go to the line of Brian Bergen from TD Cowan. Please go ahead. Hi, good afternoon. Thank you Wanted to ask on new flows here. So you had a nice acceleration in growth really over the last two quarters on consistent comps. Can you add more color on the particular areas of strength that have picked up? I know Visa Direct was one of those. I'm just curious if you think it could sustain that level of expansion or may that moderate a bit. Thanks for the question. 18% growth, as I mentioned, feel really good about the execution and the momentum in the business. It is an enormous opportunity that we have in front of us across both our commercial business and money movement with Visa Direct. I think you're familiar with the numbers 41% growth in the transactions and stable commercial volumes as well. I think this acceleration that you're referring to, we had a unique situation in Q1 where we had some one time items that really kind of depressed the growth, reported growth in Q1. And if you look at the last couple of quarters, it's more reflective I think of the underlying health in the business. That said, as we saw in Q1, that growth rate can vary from quarter to quarter based on deal timing and terms and one time items like the one that impacted Q1. And so overall I'd say at the macro level, good momentum, the underlying business is healthy and we're continuing to see that level of growth and the growth rate should be healthier and should continue to grow faster than consumer payments with some normal expected variability quarter to quarter. And just to build on Chris's points, I just think we're in the very early stages of Visa Direct growth. We spent many, many years investing in building the platform, the infrastructure, the connectivity, domestic cross border, working with issuers and acquirers and processors. And now we're able to be out there selling all around the world, finding new use cases, some of which I highlighted in my prepared remarks. You go back to 2019, we did 2 billion Visa direct transactions, we did 2.6 billion transactions this quarter. So this is just another great example of when we go and we systematically identify the need in the market, we spend the time, we build the infrastructure, we build 8.5 billion endpoints, the connectivity, the reliability, the security, the fraud capabilities. I just think we're in the very early stages of what we're going to see in terms of the growth of this business and the number of use cases and partners, many of which I highlighted in my prepared remarks that are going to want to build their use cases on this platform. Next question please. Next we'll go to the line of Sanjay Sakrani from kbw. Please go ahead. Thank You, I guess most of my. Questions have been asked and answered. But just on that last point, Ryan. You were making, I'm just wondering, where are we in the evolution of yields there? Can those go higher as you continue. To expand in some of those categories with Visa Direct? And then just in terms of Reg. Iii, is the full impact of Reg. III now in the run rate or should we expect there to be any. Uncertainties related to that? Thank you. Yeah, I'll take both of them. On the first one, we're still in the early evolution of the use cases. I mean, you know, we weren't even. Next question, please. Talking about earned wa a couple years ago, you know, Sandra. So as we've got, I think we've got 65 or so use cases now on the platform. Our teams are finding new use cases all the time. So I think we're continuing to see the evolution all that and the economics of all that will play out. What I would point you back to is what I mentioned in my prepared remarks, the tremendous success we're having in Cross Border. You know, we've had great success in selling new use cases and driving Cross Border transaction growth in Visa Direct. As you know, the yields are higher in Cross Border given the value that we add. So again, feel good about all that. Listen, I want to just emphasize in terms of Reg ii, the E Commerce debit market is a very competitive market and is going to be competitive for as far as we can see. So while Chris noted, I think, noted that, you know, the impact has remained the same, we haven't seen any change in impact and I don't. And we're not expecting any change in impact for the fourth quarter. It is a competitive business. We are out there with clients day in and day out, helping them understand the benefits of processing transactions on Visa. And there are a lot of them, which is why we feel good so far in the evolution of Reg III about how we've been able to grow that business. We feel great about the capabilities that a Visa debit transaction offers, many of which I've talked about on these calls in the past. So we're out there, we're competing, we're selling, we're delivering our products, and we feel good about our win rate. Next we'll go to the lineup. Jason Kupferberg from Bank of America, please. Go ahead. Thanks, guys. So just a clarification on revenue and then a question on volumes for this fiscal year. So it Sounds like for Q4, you're looking for revenue growth of call it 11 to 12%. I think that would put you at the low end of the low double digit guide you're maintaining for the year. So that's what I wanted to clarify. And then just a question on volumes, I think you said Q4 should be in line with Q3, which I think would bring the full year to around 7% versus the high single digit updated guide last quarter. So just as we start to tune our models for next year, what are some of the potential accelerants off that 7% level we should be considering? Hi Jason, let's unpack that. You had a couple things in there and I just want to, I think this is important. So we'll just be super clear for Q4. My guidance, our guidance for Q4 adjusted net revenue would be low double digits and you know, sort of the directional guidance I also gave is that it'd be slightly above the Q3 level that we reported, which was the 10% growth in the quarter. And so, you know, sort of take that, take those two points and I would triangulate around that and that would still get you sort of to the math of the, you know, the low end of low double digits, as you called it, for the full year. The second point was on drivers from Q3 to Q4. I did say that payment volume, payment transactions, we anticipate Q4 to be consistent with Q3. The one exception to that is in cross border where I did say it'd be slightly below the Q3 levels. And that really is, you know, based on the travel circumstances and situation in Asia that we've talked about extensively with outbound travel in Asia in particular being impacted and recovering slower than we anticipated at the beginning of the year. And so Those are the two variables in terms of the to get the Q4 guidance consistent with the intended intent that I communicated. And then as far as FY25 goes, we're at the beginning end of planning and as we always do, we'll share our expectations on 25 at the end of Q4. Next question, please. Next we'll go to the line of Dan Perlin from RBC Capital Markets. Please go ahead. Thanks. I guess more of a big picture question here, Ryan. So your AI and Genai AI investment you've talked about, I think at conferences, your desire to kind of build out your own large language model. So I'm wondering, one, you know, where do those investments stand today? I guess two, you know, what would be your expectation for early use cases of those investments and kind of the payback period? And then three is there an opportunity to drive like true incremental sales or better outcomes for your merchant constituents as opposed to just the banks. Thanks. Yeah. Hey Dan, thanks for the question on AI. First of all, I frame it as we are all in on Genai at Visa, as we've been all in on predictive AI for more than a decade. We're applying it in two broad based, different ways. One is adapting across the company to drive productivity and we're seeing real results there. You know, we're seeing great results, great adoption, great productivity increases from technology to accounting to sales all across the company. The second is applying generative AI to enhance the entire payment ecosystem. And you know, to the latter part of your question. Absolutely. You know, I guess I'd give you one set of examples or some of the risk tools and capabilities that we've been deploying in the market. You know, I mentioned the risk products that we're using on RTP and account to account payments. That's a, that is an opportunity to reduce fraud both for merchants and for issuers. I think I mentioned on a previous call we have our Visa provisioning intelligence service which is using artificial intelligence to help predict token provisioning fraud before it happens. That also is a benefit to both issuers and merchants. And the list goes on. So we are very optimistic about the positive impact that generative AI can have not just on our own productivity but on our ability to help drive increased sales and lower fraud across the ecosystem. We'll do one more question please. For our final question we'll go to the line of Harshita Rawat from Bernstein. Please go ahead. Good afternoon, Ryan. Chris, US card volume growth of 5% and surface kind of suggest a little. Bit more of a mature market. Now I understand the category differences between card volume growth and PC growth which. Influenced the delta here. Ryan, you discussed your global dam estimate. Of $20 trillion in consumer payments for Visa. How should we think about the secular digitization opportunity and the growth algorithm for the US which is your biggest. Thank you. Okay, it was a little hard for us to hear you harshita, but I. Think I got the gist of your. Question around the growth algorithm for consumer payments, especially in mature markets. So as I've said before, we see more than $20 trillion of opportunity around the world. About a quarter of that is in. The US by the way. And that's cash. That's checked. That's ach, that's electronic transactions, that's cards that run on domestic networks and the like. And you know, we're capturing that opportunity through a few different ways. One is continuing to expand acceptance and expand the places where people can use cards. You know, in the US Rent would be a great example. We've been having some really good success penetrating the rent vertical. The second is making it easier to drive E commerce growth and E commerce transactions, which has an outsourced impact on our ability to drive growth on Visa for those types of things. And third, is just continuing to innovate. With new products and services that make. Our issuers want to issue Visa and consumers want to use them. We announced a full slate of new product innovations at our Visa Payments Forum this year, and those are the types of products that we believe are going to help us win in the marketplace and help us capture and digitize a big chunk of that opportunity on the Visa network. And with that, we'd like to thank you for joining us today. If you have any additional questions, please feel free to call or email our investor relations team. Thanks again and have a great day. Thank you all for participating in the visa fiscal third quarter 2024 earnings conference call. That concludes today's conference. You may disconnect at this time and please enjoy the rest of your day.",
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          "text": "Can you talk a little bit about at what point we might expect value.",
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          "text": "Added services to sort of bend up the growth curve of Visa Consolidated.",
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          "text": "The same time tackles both incentives and.",
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          "text": "So it's concept of value in kind incentives.",
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          "text": "Value added services revenue.",
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          "text": "I was hoping you could talk a little bit about whether or not these are becoming more prominent, meaning you're using.",
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          "text": "Them a little bit more in discussions with issuers.",
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          "text": "And then if you could just briefly.",
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          "text": "Recap some of the mechanics around the revenue recognition, the contra revenue, the addition to deferred revenue, and then eventually the.",
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          "text": "Value added services revenue. Thanks a lot.",
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          "start_time": "00:34:32,647",
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          "text": "It's a little hard to tell exactly where it's going to stabilize at. But we've seen high growth, we've seen it continue to normalize. But what we do know structurally is that with E Commerce being a bigger portion of the business at the tailwind to the total cross border growth. And so you know, we are confident that that will continue to be healthy relative to the domestic spend. I'll pause there and certainly if there's anything else to add, Ryan or others, please jump in.",
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          "text": "No, nothing to add from me, Chris. Thanks, Darren.",
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          "text": "Next question please.",
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          "text": "Next we'll go to the line of Andrew Jeffrey from William Blair. Please go ahead.",
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          "text": "Hi, good afternoon. Appreciate you taking the question.",
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          "text": "In the past that's been a little bit of an indication of consumer stress. And I'm just wondering how you're thinking about that. And it seems like you're looking for the rest of the September quarter that there's a little bit of a re acceleration as we get past some of the issues that you identified in July. Just want to make sure that I'm understanding that correctly and kind of how we should interpret a little bit of the divergence in credit and debit growth right now. Thanks.",
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          "start_time": "00:50:51,200",
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          "text": "I don't know.",
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          "text": "You want to talk about the credit debit divergence?",
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          "text": "Yeah. Well, I think I'll refer back to a little bit of the comment that we made and we're seeing the July results. I also commented on the call that we are seeing a little bit of moderation in what I would call the lower spend band quote cohorts. And I think that's a little bit correlated to some of the volume, you know, volume numbers that we're seeing in the quarter related to credit versus debit. But all in all, when we look at it relative to again Q2 and Q3, we see it to be relatively stable once you factor in sort of the day's mix with leap year.",
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          "text": "Next question please.",
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          "text": "Next we'll go to the line of Brian Bergen from TD Cowan. Please go ahead.",
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          "text": "Very impressive value added services growth this quarter at 23%.",
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          "text": "Welcome to Visa's fiscal third quarter 2024 earnings conference call. All participants are in a listen only mode until the question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host, Ms. Jennifer Cuomo, Senior Vice President and Global Head of Investor Relations. Ms. Cuomo, you may begin.",
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          "text": "Thank you. Good afternoon everyone and welcome to Visa's fiscal third quarter 2024 earnings call. Joining us today are Ryan McInerney, Visa's chief executive Officer, and Chris Suh, Visa's Chief Financial Officer. This call is being webcast on the Investor Relations section of our website@investor.visa.com A replay will be archived on our site for 30 days. A slide deck containing financial and statistical highlights has been posted on our IR website. Let me also remind you that this presentation includes forward looking statements. These statements are not guarantees of future performance and our actual results could differ materially as the result of many factors. Additional information concerning those factors is available in our most recent Annual report on Form 10K and any subsequent reports on Forms 10Q and 8K, which you can find on the SEC's website and the Investor Relations section of our website. Our comments today regarding our financial results will reflect revenue on a GAAP basis and all other results on a non GAAP nominal basis unless otherwise noted. The related GAAP measures and reconciliation are available in today's earnings release and related materials available on our IR website. And with that, let me turn the call over to Ryan.",
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          "text": "Good afternoon everyone. Thank you for joining us. We delivered strong third quarter results with $8.9 billion in net revenue up 10% year over year and EPS up 12%. Our key business drivers were relatively stable as compared to Q2 adjusted for Leap year in constant dollars. Overall payments volume grew 7% year over year, US payments volume grew 5% and international payments volume grew 10%. Cross border volume excluding intra Europe rose 14% and process transactions grew 10% year over year. We recently received the results from our annual Global Client Engagement Survey where Visa achieved a Global Net Promoter score or NPS of 76, up three points from last year. We saw NPS increases across all of our client types, merchants, issuers, fintechs and processors and across our regions. The results remain Strong with a notable 6 point NPS improvement in North America. I want to thank all of our 30,000 employees who helped deliver these fantastic results and as I review some highlights from the quarter, you'll see how this focus on serving our clients by meeting their needs, innovating and helping them grow is fueling our success across consumer payments, new flows and value added services businesses. Let's start with Consumer Payments where we see more than $20 trillion of opportunity to capture cash, check, ach, domestic schemes and other forms of electronic payment. In our Client Engagement survey, our clients ranked our strategic partnership and our brand as two of the most important factors to our successful relationships. I'll share some examples of how each of these played out this quarter. In strategic partnerships, we are constantly seeking ways to add more value and grow together with our clients. We are pleased to have been named the Preferred Network Partner by Lloyd's Banking Group, renewing our debit relationship and significantly expanding our relationship in credit, winning 10 million additional credit credentials across the group's consumer and commercial business. Also in the UK, NatWest has launched a new Visa Travel Reward credit card following the signing of our partnership last year. They will also be utilizing many value added services including transaction controls and card benefits. On the European continent, we work with Rafeisen Bank International ag, a leading bank in several markets. Recently in the Czech Republic and Romania we renewed our commercial business and expanded our consumer debit and credit business totaling over 2 million potential new credentials. In Korea, we deepened our partnership with leading issuer KB koopmancard, already a user of Visa Direct Cross Border Money Movement and a Visa consumer and commercial issuer. They will grow their consumer credit and debit portfolios with Visa and use value added services including consulting and marketing services. In Peru, we extended our partnership with leading issuer Banco de Credito de Peru across consumer and commercial portfolios with plans to launch additional new flows, offerings and value added services. In the US we extended our agreement with Wells Fargo. This will allow us to continue to support Wells Fargo's strategy to reinvent their credit business and provide additional growth by leveraging key Visa assets like consulting and Visa sponsorships such as FIFA and the Olympic and Paralympic Games. On the brand front, with the Olympic Games opening ceremony later this week, it is exciting to see the engagement with the Visa brand and activation across the world in marketing campaigns, cardholder experiences and Olympic and Paralympic branded Visa issuance which I am happy to report in Europe is at nearly 6 million cards compared to the 5 million number I quoted just last quarter. We have also added nearly 100,000 new merchant locations in France in advance of the event. Our brand also plays an important role in winning co brand partnerships in India. Growing credit issuance and reaching affluent and cross border consumers remain areas of focus. We are excited about the launch of A co brand card with Adani One and ICICI bank as India's first co branded credit card with Rich Airport linked benefits for their Target base of 400 million customers through the Andani One platform. We also signed an agreement to launch a new co brand card with Tata Digital along with an Indian banking partner building on the success of our existing credit co brand relationship. This new co brand offering consists of a multi currency prepaid foreign exchange card that will target travelers from India. Also benefiting from the rewards of the Tata Digital super appeal tatanu. Across seven countries in Latin America we will work with unicomr, a major retailer and financial services provider with numerous brands to deliver a co brand credit card. In addition to using cybersource and in Samiya, we reached a De novo co brand arrangement with Bin Dawood, a leading grocer in the Kingdom of Saudi Arabia with 88 outlets and over 5 million loyalty program members. On the travel side, we extended our relationship with Malaysia Airlines from a prepaid co brand card targeting millennials and Gen Z customers to also launch a new co brand credit card for the travel minded, affluent and in the US Turkish Airlines has chosen Visa to be their exclusive network partner for their new Miles and Smiles co brand credit card. Our consumer payment strategy is focused on growing credentials as we are doing across all the partnerships I just mentioned and increasing acceptance. Locations and wallets are a great example of where this comes together, where Visa can be a funding source, an embedded credential and an accepted form of payment by wallet merchants. This increases the value proposition for wallet providers and their users. 2 Wallet highlights this quarter are in Peru and Vietnam. Yape is a Peruvian super app with more than 15 million users who already have a Visa credential that enables them to Send money across P2P apps via Visa Direct and just recently they launched Tap to Phone functionality for their more than 2 million merchants to accept Visa. And in Vietnam, a country with approximately 50 million wallet users, the three leading digital wallets, Momo, Vinpay and Zalopay are now enabling their users to utilize Visa cards as a funding source for transactions at over 500,000 QR acceptance points managed by these wallets. One additional area that we are very focused on is delivering simple, easier, easy and secure checkout experiences. Let me share a few recent examples. First, we are integrating Click to Pay and the Visa Payment passkey service, enabling a customer to authenticate themselves using biometrics. Already we have hundreds of issuers enabled for passkeys in Europe and a number of issuers who represent more than 50% of our E commerce payments volume in Europe. Piloting the solution second, we crossed 10 billion tokens this quarter, a significant milestone and in 2023 alone, Visa tokens helped generate more than an estimated $40 billion in incremental E commerce revenue for businesses globally and saved more than $600 million in fraud. Third is the ability to tap for more use cases on a mobile device. With tapping as one of the best in person commerce experiences, we want to provide Visa users with more ways to tap, including TAP to pay, Tap to authenticate an identity, Tap to add a card or TAP to send money to family or friends and finally this quarter Tap to pay grew 4 percentage points from last year to 80% of face to face transactions globally excluding the U.S. in the U.S. we surpassed 50% and have 30 U.S. cities above 60% penetration. Now moving on to new flows this quarter New flows revenue grew 18% year over year in constant dollars with Visa Direct overall transactions growing 41% for the quarter to 2.6 billion and commercial volumes up 7% year over year in constant dollars. Let me provide some Updates starting with B2B where we have focused on penetrating new verticals and delivering innovative products and solutions in healthcare. We will work with AXA and PA Share to launch a commercial virtual card solution to simplify the claims processes for their customers worldwide. We have also expanded our virtual card acceptance with a key business services provider, Cintas, who offers uniform safety and fire protection services to over 1 million customers. Together with our partner Bill Trust, we will help Cintas streamline their payments, automate processes and manage costs on Bill Trust's Business Payments network or bpn. We also just recently extended our long standing BPN collaboration with Bill Trust that connects suppliers and buyers to facilitate straight through processing of virtual card payments with rich data that optimizes acceptance costs. Our products and solutions in B2B remain very important in winning and growing our business. One such solution is the enhanced B2B data that we can provide in Brazil. Together with Celero, a leading business financial management solution, we will provide issuers with enhanced visibility into small business spend by aggregating data across cards, bank accounts, bolettos and more, enabling them to better manage their client relationships and offer compelling products. Another solution is Spend Clarity which provides expense program management including card issuance controls and reporting. Wells Fargo has white labeled our solution called Wells One Expense Manager which has now onboarded 6,000 corporate clients representing over 1 million users providing access to their spend data. Now moving on to Visa Direct, we continued to grow our transactions through expanded and new relationships over the past year, total Visa direct cross border P2P transactions have nearly doubled with Europe and Semia being the largest regions in Semia. We are very excited to have renewed our Visa direct relationship with FinTech Mono Bank. In addition to renewing their consumer and commercial credit, debit and prepaid portfolios in Asia Pacific, we are partnering with China Zhongsheng bank on cross border capabilities including Visa Direct and Currency Cloud, allowing the bank to support cross border payments for their merchant clients. Canadian fintech Nuvi has extended its agreement with us for Visa Direct across all cross border use cases in more than 30 countries for their merchant clients and recently became the first Visa Direct enabler in Colombia. We also executed our first global agreement with World Remit and sendwave, enabling their customers to eventually send Visa Direct Cross border remittances from 50 countries to recipients in 130 countries quickly. A leading South Asian marketplace has enabled Visa Direct Cross border remittance solutions for US Customers to send money to relatives and friends in India and the rest of South Asia. And in Earned wage access, we reached an agreement with Weaver, a UK based embedded finance provider. In addition to card issuance, they will be utilizing Visa Direct to enable Weaver's business clients to offer employee expense reimbursement, reward and recognition and earned wage access. Earned wage access provider PayActive, who serves 4,000 businesses, has renewed its agreement with us and will enable Visa plus for payouts. Similarly, we expanded our relationship with enabler Astra. In addition to domestic disbursements, Astra will now offer cross border remittances, implement Visa to reach domestic wallets in the US and expand to additional use cases including payroll, earned wage access and marketplaces. Visa is still in the early stages but is fully rolled out and live for PayPal and Venmo users and more providers continue to join the platform, wrapping up new flows. We also renewed an agreement with fis, an important issuer processing partner, to enable a suite of value added services and new flows capabilities for their clients including Visa Direct. And now on to Value Added Services where revenue was up 23% in the third quarter in constant dollars. Let me highlight some of the progress we have made in driving adoption and growth among our value added services portfolio. First in issuing solutions. One area of strong revenue growth this quarter was in card benefits where we enable our clients to offer unique value propositions tailored to their customer base in travel, entertainment, restaurants, insurance and more. Strong issuance in premium cards across most of our regions has fueled this growth. In the third quarter. For example, in Latin America, travel benefits have grown with over 370,000 unique visits to our Visa Infinite Airport lounge in Brazil, representing customers from a number of leading issuers. In addition, since its launch in 2022, our Visa Infinite Fast Pass in Brazil, which allows cardholders to get through airport security more quickly, has screened over 1 million travelers. These are among the top 5 card benefits in Brazil and deliver value to customers, issuers and Visa. We continue to add more benefits like the recently launched partnership with OpenTable to offer eligible Visa cardholders access to coveted restaurant reservations and experiences in the US with plans to expand into Canada and Mexico in acceptance solutions. Third quarter growth was driven by increasing utilization across both token and e Commerce related services in E commerce. One such example is with iFood, the largest food delivery platform in Brazil, who is utilizing our Verifi solution to help prevent disputes before they become chargebacks. In addition, they will be using our authentication solutions in Risk and identity solutions. We continue to see strong adoption by new and existing clients, driven in part by growth in card not present transactions. In North America, acquirer worldpay will be expanding their use of our authentication solutions from Cardinal Commerce, fostering collaboration and real time enhanced data exchange between worldpay merchants and issuers during card not present transactions, reducing fraud and allowing more transactions to be properly authenticated and authorized securely. We are also pleased that the pilot of our account to account risk scoring solution, visa protect with pay.uk has had great results showing an average 40% uplift in fraud detection over the three month pilot period. In addition, we are now launching Visa Protect in Argentina with a core payments technology company Coelsa, after successfully piloting the solution there as well. The last two value added services are open banking and advisory services. We continue to sign new partners with TINC in Europe and the US and as I mentioned earlier, we continue to see strong growth in client demand for our consulting and marketing services, particularly around marquee events such as the Olympic and Paralympic Games. Our Value Added services portfolio of solutions is strong and is driving meaningful growth for our clients and for Visa. Before I close, I wanted to speak to the fact that the settlement reached for the injunctive relief class was rejected by the court. We are of course disappointed with this decision. We believe that the prior settlement provided meaningful relief to all merchants and we will continue to work towards another settlement to close. So far this fiscal year we have seen strong revenue and EPS growth as a result of relatively stable volume and transaction growth. I remain very excited about the opportunity that lies ahead of us at Visa. We come to work in service of our clients and partners and are focused on building and deploying the best solutions possible across consumer payments, new flows and value added services. Now over to Chris.",
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          "text": "Thanks Ryan. Good afternoon everyone. In Q3 we had another strong quarter with relatively stable growth across payments volume, cross border volume and process transactions when compared to Q2 adjusted for Leap year in constant dollars, Global payments volume was up 7% year over year and cross border volume excluding Inter Europe was up 14% year over year. Process transactions grew 10% year over year. Fiscal third quarter net revenue was up 10% in both GAAP and constant dollars in line with our expectations. EPS was up 12% year over year and 13% in constant dollars. Now let's go into the details. In the US payment volumes, growth numbers were generally in line with Q2 adjusted for leap year with total Q3 payments volume growing 5% year over year with credit and debit also growing 5. Card present volume grew 2% and card not present volume grew 7% in the US while growth in the high spend consumer segment remained stable compared to prior quarters, we saw a slight moderation in the lower spend consumer segment. Moving to international markets. Total payments volume was up 10% in constant dollars, relatively stable with Q2 when adjusted for leap year payments volume growth rates were strong for the quarter in most major regions with Latin America, semia and Europe ex UK each growing more than 16% in constant dollars. Asia Pacific payments volume slowed to less than half a point of year over year. Growth in constant dollars for the quarter driven primarily by the macroeconomic environment, most notably in mainland China. Now to cross border volume which I will speak to today in constant dollars and excluding Intra Europe transactions, total cross border volume was up 14% in Q3, relatively stable to Q2 adjusted for Leap year. Cross border card not present Volume growth excluding travel and adjusted for cryptocurrency purchases was in the mid teens helped by continued strength in retail cross border travel volume growth was also up in the mid teens or 157% index to 2019. This quarter we saw the inbound Asia Pacific index improve 9 points at a similar pace to Q2 to 151% of 2019. The improvement in Asia Pacific outbound travel, however, slowed from Q2 with the index increasing by less than a point to 125% of 2019. We continued to see the same primary drivers as last quarter with some additional pressure from macroeconomic conditions. Now let's review our third quarter financial results. I'll start with the revenue components. Service revenue grew 8% year over year versus the 8% growth in Q2 constant dollar payments volume with revenue yield improving sequentially and versus last year due to improving utilization of card benefit data processing revenue grew 9% versus 10% Process transaction growth with the revenue yield generally in line sequentially and versus last year. International transaction revenue was up 9% versus the 14% increase in constant dollar cross border volume excluding Intra Europe impacted by lapping higher currency volatility from last year. Volatility levels remain consistent on average to last quarter. Other revenue grew 31%, primarily driven by strong consulting and marketing services. Revenue related to the Olympics and to a lesser extent pricing. Client incentives grew 11% now onto our three growth engines. Consumer payments growth was driven by relatively stable payments volume, cross border volume and process transaction growth. New flows revenue grew 18% year over year in constant dollars. Visa direct transactions grew 41% year over year helped by growth in Latin America for interoperability among P2P apps. Commercial volumes rose 7% year over year in constant dollars. In Q3 value added services revenue grew 23% in constant dollars to $2.2 billion primarily driven by issuing and acceptance solutions and advisory services. Operating expenses grew 14% primarily due to increases in general and administrative personnel and marketing expenses including spend related to the Olympics. FX was a half point drag versus the one and a half point benefit we expected. Tismo represented an approximately one point drag. Non operating income was $73 million. Our tax rate was 18.8% and EPS was $2.42, up 12% over last year inclusive of an approximately one and a half point drag from exchange rates and an approximately half point drag from Pismo. In Q3 we bought back approximately $4.8 billion in stock and distributed over 1 billion in dividends to our stockholders. At the end of June we had 18.9 billion remaining in our buyback authorization. Now let's move to what we've seen so far in July through the 21st with volume growth in constant dollars. Cross border is excluding intra Europe. US payments volume was up 4% with debit up 4% and credit up 3% year over year. This slight deceleration from Q3 does not appear to be from any one factor, but likely a number of smaller factors such as weather, timing of promotional shopping events and the technology outage among others. Cross border volume grew 13% year over year below Q3 levels with travel related volume growing slightly less which continued to be impacted by Asia Pacific and Card not present X Travel volume growing at similar levels to Q3 process transactions grew 9% year over year. Now onto our expectations. Remember that adjusted basis is defined as non gaap, results in constant dollars and excludes acquisition impacts. You can review these disclosures in our earnings presentations for more detail.",
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          "text": "Let's start with the fourth quarter.",
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          "text": "And I think as you mentioned, Chris.",
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          "text": "We expect payments volume and process transactions to grow at a similar rate to Q3. For total cross border volume growth, we are expecting to end up slightly below Q3. Currency volatility continues to average around 4 year lows through July 21st and as such we are making an adjustment to currency volatility expectations for Q4. Now, assuming volatility will stay in line with Q3 levels, incentives are expected to be at their lowest growth rate all year. Pulling it all together, we expect adjusted net revenue growth in the low double digits, which equates to a slight improvement from the 10% adjusted revenue growth rate in the third quarter. We expect our Q4 adjusted operating expenses to grow in the high single digit non operating income is expected to be between 40 and $50 million. The tax rate is expected to be between 19 and 19.5% in Q4, which puts Q4 adjusted EPS growth rate in the high end of low double digit moving to the full year. With 3/4 now complete, our expectations for full year adjusted net revenue growth remain unchanged from what we shared at the start of the year. While absorbing the impact of lower currency volatility and the macroeconomic challenges in Asia which have affected volumes, we still expect to reach low double digit adjusted net revenue growth for the full year. Full year adjusted operating expense growth will be in the high single digit to low double digits, reflecting the less favorable impact of fx. This keeps full year adjusted EPS growth in the low teens. In closing, we delivered strong results this quarter with new flows and value added services revenue growing faster than consumer payments. We extended our existing relationships, won new clients and invested to develop innovative products and solutions, all positioning us for continued growth into the future. But now Jennifer, it's time for some Q and A.",
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          "text": "Thanks Chris. And with that, we're ready to take questions.",
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          "text": "If you would like to ask a question, please press Star one and clearly record your name. You will be announced prior to asking your question. To ensure all questioners are heard, we ask that you please limit yourself to one question once again. To ask a question, please press Star 1. To withdraw your question, press Star 2. Our first question comes from Darren Peller from Wolf Research. Please go ahead.",
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          "text": "Hey, thanks guys. Look, let me just start. The US volume growth rate obviously is a bit softer and if you could help us distill what you consider structural versus you know, cyclical. I think that'd be a good place to start. But adding onto it really is just the ability for you to grow double digit revenue with only 4, 5, 6, you know, mid single digit US volume growth is coming from value Added Services. It's coming from cross border. Can you help us understand if that kind of trend, you believe the company has that capability to grow those rates on revenues even in this context of US volume trends? Thanks guys.",
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          "text": "Yeah, hi Darren. So let me start with the U.S. let me start with the first part of your question and then we'll maybe get into zoom out and talk about maybe the longer question. So in the US in Q3 we did see stable drivers relative to Q2. Once you adjust for leap year, that's 5% payment volumes growth in the third quarter. In the 21 days since in July that number did tick down to 4%. Maybe I'll just sort of give you the full arc of what we're seeing. So 4%. Let's just level set on those numbers. 4% in the 21 days versus 5% in Q3. And so for that we did stare at a lot of the drivers, the factors that impacted those three weeks. And there was a lot going on and I referenced a few of them on the call and maybe I'll expand on those a bit. First we had a major hurricane, Hurricane Beryl and impacted Texas and other parts of the US nearby. The second, I referenced the timing of promotional E commerce events. Maybe I can expand on that a little bit. The timing this year was later and in E Commerce customers are billed when the goods are shipped. And so some of that shipping period fell out of that 21 period. So we had a little bit of difference in the 21 day period to the comparable year ago. And third, obviously the major tech outage that happened at the end of last week that also had some impact. So when we look at that, no single fact drove that one point of change from Q3 to the first part of July. But you know, all things considered, we actually feel pretty good about the three week results. Now the second part of your question really was around, you know, sort of the low double digits in the context of cross border VAs and CMS. I'll sort of back into the question. We've had consistent strong performance in VAs, over $2 billion of revenue, over 20% growth for many quarters consecutively. And we're seeing strength across, across the business in issuing solutions and acceptance and advisory. That's a business that we feel great about the momentum in with our new flows business. 18% growth as Ryan talked about in the quarter, that's the second quarter in a row where we're seeing growth in the teens. Great execution, stable volumes and Visa Direct transactions growing at a high level. As you know, that business also, you know, quarter to quarter can vary a little bit in the growth rates as we saw in the first half of the year. But all in all feel really good about the continued strength in that business. And then cross border. Well, cross border maybe I'll just zoom out a little bit and talk about cross border and what we've seen over the course of time. If you recall, pre pandemic cross border grew, you know, travel grew sort of in the high single digits to low double digits and E Commerce, which was about a third of the business grow, grew into the teens, sometimes into the mid teens. Obviously the pandemic happened, travel really contracted, E commerce grew faster and since then, now post pandemic what we're seeing now is that E Commerce is roughly 40% of the business and the growth rate has normalized. It stabilized back to pre pandemic levels. And so let's say teens growth on e commerce on 40% of the cross border business travel after the post pandemic.",
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          "text": "Run up has normalized.",
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          "text": "You know, it's Ryan, Andrew, thanks for the question. And yeah, we're very excited about not only what we delivered in terms of value added services growth for the quarter, what we've been delivering consistently for several years now since we shared with you all the strategy and kind of became very purposeful about our go to market approach, I mean go back to, I think it was 2021, we did about $5 billion in revenue. 2022, 6 billion. Last year was 7 billion. Like you said, we did 2.2 billion this quarter, up 23%. So I think what we've shown is that we have delivered cons consistent growth quarter after quarter and year after year in these businesses. And we're super optimistic about where we go from here. I mean we think about, you know, we think about the opportunities really in three different segments. You know, the first is we have a series of value added services, some of which Chris outlined in his previous answer, that are very focused on enhancing value for Visa transactions. You know, risk products like Visa secure dispute tools like Visa Resolve, online card benefits, like I mentioned in my prepared remarks. And we've that has historically been the largest part of our value added services business.",
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          "start_time": "00:36:55,796",
          "end_time": "00:36:57,004",
          "text": "And we've shown that we can drive.",
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          "text": "Great growth in that area. Increasingly we're building out a set of services that add value for non visa transactions. You know, we've done some things in this space before, you know, some of our platforms like CyberSource, Authorize.net, verifi. But then you've heard me talk in the last couple quarters about expanding our risk capabilities, for example to not just other card networks, but also to RTP and account to account services. And I mentioned the great results we've had in both the UK and in Argentina on that front. And then the third area of opportunity for us is expanding our value added services beyond payments. Historically we've had things like Visa consulting and analytics and our marketing services and some of the open banking services delivered by Tink.",
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          "text": "But we're continuing to build out a.",
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          "text": "Portfolio of value added services for our clients and partners beyond payments, things like the cyber protection capabilities that we've been bringing to market. So we've demonstrated consistent growth. We believe we'll be able to continue to demonstrate consistent growth. We've got a product pipeline and a go to market approach all over the world with a diverse set of clients and we feel good about the opportunity.",
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          "text": "Next we'll go to the line of Brian Keen from Deutsche Bank. Please go ahead.",
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          "text": "Next question please.",
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          "text": "Hi guys. Good afternoon. Chris. Just want to ask about incentives being the lowest expectation will be for the fourth quarter. Can you just talk a little bit about how much of that is volume driven versus the amount of renewals you're seeing. And just trying to think about as we head into next fiscal year, just.",
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          "start_time": "00:38:37,174",
          "end_time": "00:38:39,198",
          "text": "What kind of growth or sustainable growth.",
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          "start_time": "00:38:39,254",
          "end_time": "00:38:41,010",
          "text": "Should we think about for incentives?",
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          "start_time": "00:38:41,470",
          "end_time": "00:38:42,250",
          "text": "Thanks.",
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          "text": "Thanks for the question. You know, I'll even take us back a little bit about the expectations that we had for incentives coming in to the fiscal year as we ended fiscal 23, that was a high year for us in terms of volume of renewals, a little higher than our typical sort of normal cadence. That did impact how we thought about the incentive volumes in FY24. And even last year, we had sort of a different growth rate in the first half and the second half of the year. And so as we looked across this year, we had a slightly lower volume of renewals this year. Obviously, year to date, incentives have played out slightly differently, largely due to client performance, deal timing, things like that. And overall it's been better than. It's been lower, I guess, than what we anticipated. When we go into Q4, sort of the same trend applies. We still expect Q4 to benefit from the lapping of the high incentives that we saw in the second half of last year, which informs again, the growth rate that we anticipate in Q4. We don't have a lot to share about FY 2025 at this point, but we'll share plenty in the next earnings call.",
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          "start_time": "00:39:50,260",
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          "text": "Next question, please.",
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          "text": "Next we'll go to the line of Ken Sahowski from Autonomous Research. Please go ahead.",
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          "text": "Hey, good afternoon. Thanks for taking the question. I wanted to ask about bas, and I think the team has talked about how some of the VAS revenue is correlated with transaction growth, but you also have parts of that business that are more recurring or less recurring in nature. So can you just help us understand how you think about the cyclicality of vaas and how that business might perform in a lower volume growth environment? And I also think the team has talked about pricing for value in vast. So how much more room is left to go there and how does that help with the resiliency of the business? Thank you, Ken.",
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          "text": "Hey, well, thanks for the question. And you know, you're asking about the MDL litigation. You know, I Guess I'll just back up. You know, the first thing I would say is we strongly disagree with the judge's decision. We believe the settlement was fair. We believe the settlement provided meaningful relief to all merchants. You know, the second thing I would say is the decision failed to take into consideration a number of things, especially the complex multisided ecosystem that we operate in, the role that, the complicated role that many different players in the ecosystem deliver. But having said that, we're pursuing a revised settlement. It's too early to speculate on what that settlement is, so I won't do that today. But I would ask everybody to keep in mind, you know, a settlement can occur at any point before, during or even after the trial. So just keep that in mind as the process plays out.",
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          "start_time": "00:47:19,580",
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          "text": "Next question, please.",
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          "start_time": "00:47:21,340",
          "end_time": "00:47:25,200",
          "text": "Next we'll go to the line of Timothy Chiodo from ubs. Please go ahead.",
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          "text": "It's Ryan on the second part of your question. You know, our ability to price for value is a function of the value that we bring to the market. And we feel great about the value that we're bringing to the market. And I think you see it in our results, you know, across the various different areas of issuing solutions, acceptance solutions, risk and identity solutions, advisory. I mean, we just continue to bring products and services that are ultimately helping our clients grow their business, helping our clients reduce fraud, grow authorizations, those types of things. And we believe we'll continue to do that and we believe we'll be able to continue to price for value. As I think I was saying earlier, the biggest portion of our value added services are a function of Visa transactions. And so, you know, obviously Visa transactions, as they go up or down, have an impact on that, but so does our ability to sell more services. You know, on previous calls, I've talked about the fact that we still have the majority of our clients that have yet to have the type of penetration and depth that we've been able to achieve with others. So as we continue to penetrate our clients all around the world and in the various markets that we deliver, as I was saying earlier to the earlier question, I'm very optimistic about our ability to continue to grow this business as we have.",
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          "speaker": "",
          "start_time": "00:41:52,410",
          "end_time": "00:41:53,790",
          "text": "Next question, please.",
          "created_at": "2025-01-08T22:15:56.806383Z",
          "updated_at": "2025-01-08T22:15:56.806383Z"
        },
        {
          "segment_id": 39,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:41:54,250",
          "end_time": "00:41:58,030",
          "text": "Next we'll go to the line of Tianjin Huang from JPMorgan. Please go ahead.",
          "created_at": "2025-01-08T22:15:56.859215Z",
          "updated_at": "2025-01-08T22:15:56.859215Z"
        },
        {
          "segment_id": 40,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:41:59,450",
          "end_time": "00:42:00,066",
          "text": "Hey, thanks.",
          "created_at": "2025-01-08T22:15:56.942286Z",
          "updated_at": "2025-01-08T22:15:56.942286Z"
        },
        {
          "segment_id": 41,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:42:00,098",
          "end_time": "00:42:11,230",
          "text": "Good afternoon. Just curious if you're, if you've updated your US outlook here in the second half, are you still expecting transaction sizes to accelerate in the U.S. especially here in the fourth quarter?",
          "created_at": "2025-01-08T22:15:56.971363Z",
          "updated_at": "2025-01-08T22:15:56.971363Z"
        },
        {
          "segment_id": 42,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:42:13,530",
          "end_time": "00:43:06,186",
          "text": "Hi, Tinjin, thanks for the question. Yeah, we had forecasted ats, as, you know, growth to improve throughout the pace of this year from quarter to quarter. And we did see that. We saw ATS improve in the third quarter, specifically in the US ATS was slightly better in Q3 than in Q2. It got to basically flat year over year. In Q3, we saw improvement in a number of categories sequentially. Restaurant, qsr, fuel, telecom, utilities, insurance, to name a few. And we do anticipate in Q4 that we'll continue to see slight improvement sequentially. Again, you know, the one thing, the one watch out, I'll call out is fuel prices could impact that trajectory. And so we'll watch that closely. So, yeah, it is playing out as we anticipated. The pace is slightly varied from what we anticipated, but it is continuing to improve and I think that's the important thing.",
          "created_at": "2025-01-08T22:15:57.036283Z",
          "updated_at": "2025-01-08T22:15:57.036283Z"
        },
        {
          "segment_id": 43,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:43:06,338",
          "end_time": "00:43:07,590",
          "text": "Next question, please.",
          "created_at": "2025-01-08T22:15:57.12012Z",
          "updated_at": "2025-01-08T22:15:57.12012Z"
        },
        {
          "segment_id": 44,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:43:08,050",
          "end_time": "00:43:12,150",
          "text": "Next we'll go to the line of Gus Gala from Moness, Crespi and Hart. Please go ahead.",
          "created_at": "2025-01-08T22:15:57.154827Z",
          "updated_at": "2025-01-08T22:15:57.154827Z"
        },
        {
          "segment_id": 45,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:43:13,270",
          "end_time": "00:43:26,970",
          "text": "Hi guys. Thank you. Can we talk a little bit about the contactless payments penetration? Can you maybe highlight maybe what the gap is in penetration rates across maybe some of your older card holders, young.",
          "created_at": "2025-01-08T22:15:57.171141Z",
          "updated_at": "2025-01-08T22:15:57.171141Z"
        },
        {
          "segment_id": 46,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:43:27,350",
          "end_time": "00:43:38,380",
          "text": "Cardholders, just trying to get around to what a terminal level of penetration could look like. Thanks. You're asking, I heard you're asking about Tap to pay. Yes.",
          "created_at": "2025-01-08T22:15:57.252558Z",
          "updated_at": "2025-01-08T22:15:57.252558Z"
        },
        {
          "segment_id": 47,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:43:40,320",
          "end_time": "00:43:41,368",
          "text": "I mean, yeah.",
          "created_at": "2025-01-08T22:15:57.406491Z",
          "updated_at": "2025-01-08T22:15:57.406491Z"
        },
        {
          "segment_id": 48,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:43:41,384",
          "end_time": "00:44:03,922",
          "text": "I mean, just back up first in the big picture of things, you know, the fact that outside of the United States, 8 out of 10 of all the visa face to face transactions around the entire planet are tapped to pay now. I mean, that just tells you right there that it's all segments, all demographics, all use cases, all product types. I mean, you know, we're at 80%.",
          "created_at": "2025-01-08T22:15:57.470388Z",
          "updated_at": "2025-01-08T22:15:57.470389Z"
        },
        {
          "segment_id": 49,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:44:04,026",
          "end_time": "00:44:05,538",
          "text": "Overall around the world.",
          "created_at": "2025-01-08T22:15:57.531126Z",
          "updated_at": "2025-01-08T22:15:57.531126Z"
        },
        {
          "segment_id": 50,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:44:05,594",
          "end_time": "00:45:01,518",
          "text": "We've got, I think more than 55 countries that are now more than 90% contactless penetration. So increasingly in most countries, for most customers, for most products all around the world, that's just the default way that people are paying. And in the US the curve is maturing exactly how we'd expect it based on what we've seen in, you know, 100 plus countries all around the world. You know, as I said in my prepared remarks, now one out of every two transactions in the US are taps in a place like New York City where many of you on the call spend time. We're above 75% now. So in New York City, where was one of the early adopters of transit, we're up, we're above, I think 75% plus of all face to face transactions. That's up from just 50% two years ago. So again, at that level of penetration.",
          "created_at": "2025-01-08T22:15:57.588556Z",
          "updated_at": "2025-01-08T22:15:57.588556Z"
        },
        {
          "segment_id": 51,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:45:01,614",
          "end_time": "00:45:03,022",
          "text": "In a market the size of New.",
          "created_at": "2025-01-08T22:15:57.627255Z",
          "updated_at": "2025-01-08T22:15:57.627255Z"
        },
        {
          "segment_id": 52,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:45:03,046",
          "end_time": "00:45:22,490",
          "text": "York City, it's across the board in terms of products and issuers and segments and the like. So I think as we continue to see this growth happen, you know, buyers, sellers, they love tapping as a way to pay and we're going to continue to see that growth accelerate in a place like the U.S. next question, please.",
          "created_at": "2025-01-08T22:15:57.639391Z",
          "updated_at": "2025-01-08T22:15:57.639391Z"
        },
        {
          "segment_id": 53,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:45:23,090",
          "end_time": "00:45:26,710",
          "text": "Next we'll go to the line of Will Nance from Goldman Sachs. Please go ahead.",
          "created_at": "2025-01-08T22:15:57.68217Z",
          "updated_at": "2025-01-08T22:15:57.68217Z"
        },
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          "segment_id": 54,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:45:28,450",
          "end_time": "00:46:12,920",
          "text": "Hey guys, thanks for taking the question. You know, we've been getting a lot of questions around the litigation updates and you know, I totally understand the level of uncertainty is a lot higher now, but I guess the most common investor question that we're getting is around the potential impacts to the overall ecosystem if we see a much greater reduction in interchange rates than what was proposed and I guess specifically how the reduction in interchange rates could reverberate through renewal negotiations with issuers and then longer term how this may impact the trajectory of incentives and net yield. So just wondering if we could hear kind of your perspective about, you know, the potential reduction or a larger reduction in the overall size of sort of ecosystem revenue and you know, if that changes the direction of any of the key indicators that we're focused on over time. Thanks.",
          "created_at": "2025-01-08T22:15:57.723052Z",
          "updated_at": "2025-01-08T22:15:57.723052Z"
        },
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          "segment_id": 58,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:47:26,220",
          "end_time": "00:47:26,628",
          "text": "Great.",
          "created_at": "2025-01-08T22:15:57.979767Z",
          "updated_at": "2025-01-08T22:15:57.979767Z"
        },
        {
          "segment_id": 59,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:47:26,684",
          "end_time": "00:47:28,852",
          "text": "Thanks for taking the question. I want to hit one that at.",
          "created_at": "2025-01-08T22:15:58.067201Z",
          "updated_at": "2025-01-08T22:15:58.067201Z"
        },
        {
          "segment_id": 68,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:47:56,590",
          "end_time": "00:49:02,130",
          "text": "Yeah, I'll just give you the high level on this. You know, the value in kind is a great way for us to, as it says, to deliver value to our clients. And increasingly our clients, as you see in our performance, are preferring to buy our value added services versus just take incentives that might drop to the bottom line. So that is absolutely something that our clients are asking for more of. It's something that is helping our clients grow their businesses. And you know, I talked earlier about just the last several years about, you know, our product pipeline, how we've gone to market, how we've built new products and solutions and services for our clients, you know, and that's what's driving the demand. So, you know, that's kind of become a more important part of our client renewals and our client renewal discussions. And you know, increasingly value added services are becoming a way for us to differentiate ourselves with our clients and grow our consumer payments business. Yeah, you want to talk about the.",
          "created_at": "2025-01-08T22:15:58.485448Z",
          "updated_at": "2025-01-08T22:15:58.485448Z"
        },
        {
          "segment_id": 69,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:49:02,590",
          "end_time": "00:49:38,722",
          "text": "Tim, to the second part of your question, maybe I'll just give you a high level summary. You know, I think you have sort of the pieces you called out, you know, at A high level. When value in kind is offered in lieu of a cash incentive, it can it would be recognized as a contra revenue at the time that it's granted or earned depending on the nature of the contract. And then on the other side when the client is able to utilize that value in kind for services from Visa. Commonly in our value added services business, that's then recognized as revenue and the associated costs are also recognized in our.",
          "created_at": "2025-01-08T22:15:58.52649Z",
          "updated_at": "2025-01-08T22:15:58.52649Z"
        },
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          "segment_id": 71,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:49:41,930",
          "end_time": "00:49:45,550",
          "text": "Next we'll go to the line of James Fossett from Morgan Stanley. Please go ahead.",
          "created_at": "2025-01-08T22:15:58.55569Z",
          "updated_at": "2025-01-08T22:15:58.55569Z"
        },
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          "segment_id": 70,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:49:38,746",
          "end_time": "00:49:41,390",
          "text": "P and L. Next question please.",
          "created_at": "2025-01-08T22:15:58.568148Z",
          "updated_at": "2025-01-08T22:15:58.568148Z"
        },
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          "segment_id": 73,
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          "speaker": "",
          "start_time": "00:49:46,954",
          "end_time": "00:49:57,468",
          "text": "Thank you very much. I wanted just to ask a follow up question on near term trends. We've seen a little bit of or further slowing in credit than in debit.",
          "created_at": "2025-01-08T22:15:58.66127Z",
          "updated_at": "2025-01-08T22:15:58.66127Z"
        },
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          "segment_id": 72,
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          "speaker": "",
          "start_time": "00:49:46,490",
          "end_time": "00:49:46,898",
          "text": "Great.",
          "created_at": "2025-01-08T22:15:58.666284Z",
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        },
        {
          "segment_id": 74,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:49:57,564",
          "end_time": "00:49:59,372",
          "text": "Over the last couple of months and.",
          "created_at": "2025-01-08T22:15:58.700434Z",
          "updated_at": "2025-01-08T22:15:58.700435Z"
        },
        {
          "segment_id": 76,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:50:27,360",
          "end_time": "00:50:51,160",
          "text": "Let me just give a little context on it and then Chris, feel free to add or correct. Like Chris said, we're three weeks into the quarter. We had a hurricane, we had a tech outage across the country. We had a number of things happen. So we're not kind of taking three weeks as a trend. We'll see kind of how things progress from here in just terms kind of what happens for the rest of the quarter.",
          "created_at": "2025-01-08T22:15:58.784662Z",
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        },
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          "segment_id": 82,
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          "speaker": "",
          "start_time": "00:51:37,300",
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          "text": "Hi, good afternoon. Thank you Wanted to ask on new flows here. So you had a nice acceleration in growth really over the last two quarters on consistent comps. Can you add more color on the particular areas of strength that have picked up? I know Visa Direct was one of those. I'm just curious if you think it could sustain that level of expansion or may that moderate a bit.",
          "created_at": "2025-01-08T22:15:59.020858Z",
          "updated_at": "2025-01-08T22:15:59.020858Z"
        },
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          "segment_id": 83,
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          "speaker": "",
          "start_time": "00:51:57,490",
          "end_time": "00:53:02,820",
          "text": "Thanks for the question. 18% growth, as I mentioned, feel really good about the execution and the momentum in the business. It is an enormous opportunity that we have in front of us across both our commercial business and money movement with Visa Direct. I think you're familiar with the numbers 41% growth in the transactions and stable commercial volumes as well. I think this acceleration that you're referring to, we had a unique situation in Q1 where we had some one time items that really kind of depressed the growth, reported growth in Q1. And if you look at the last couple of quarters, it's more reflective I think of the underlying health in the business. That said, as we saw in Q1, that growth rate can vary from quarter to quarter based on deal timing and terms and one time items like the one that impacted Q1. And so overall I'd say at the macro level, good momentum, the underlying business is healthy and we're continuing to see that level of growth and the growth rate should be healthier and should continue to grow faster than consumer payments with some normal expected variability quarter to quarter.",
          "created_at": "2025-01-08T22:15:59.096411Z",
          "updated_at": "2025-01-08T22:15:59.096411Z"
        },
        {
          "segment_id": 84,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:53:02,930",
          "end_time": "00:54:14,250",
          "text": "And just to build on Chris's points, I just think we're in the very early stages of Visa Direct growth. We spent many, many years investing in building the platform, the infrastructure, the connectivity, domestic cross border, working with issuers and acquirers and processors. And now we're able to be out there selling all around the world, finding new use cases, some of which I highlighted in my prepared remarks. You go back to 2019, we did 2 billion Visa direct transactions, we did 2.6 billion transactions this quarter. So this is just another great example of when we go and we systematically identify the need in the market, we spend the time, we build the infrastructure, we build 8.5 billion endpoints, the connectivity, the reliability, the security, the fraud capabilities. I just think we're in the very early stages of what we're going to see in terms of the growth of this business and the number of use cases and partners, many of which I highlighted in my prepared remarks that are going to want to build their use cases on this platform.",
          "created_at": "2025-01-08T22:15:59.156832Z",
          "updated_at": "2025-01-08T22:15:59.156833Z"
        },
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          "segment_id": 85,
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          "speaker": "",
          "start_time": "00:54:14,750",
          "end_time": "00:54:16,130",
          "text": "Next question please.",
          "created_at": "2025-01-08T22:15:59.239464Z",
          "updated_at": "2025-01-08T22:15:59.239464Z"
        },
        {
          "segment_id": 86,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:54:16,910",
          "end_time": "00:54:21,170",
          "text": "Next we'll go to the line of Sanjay Sakrani from kbw. Please go ahead.",
          "created_at": "2025-01-08T22:15:59.264116Z",
          "updated_at": "2025-01-08T22:15:59.264116Z"
        },
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          "segment_id": 87,
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          "speaker": "",
          "start_time": "00:54:22,430",
          "end_time": "00:54:23,974",
          "text": "Thank You, I guess most of my.",
          "created_at": "2025-01-08T22:15:59.32732Z",
          "updated_at": "2025-01-08T22:15:59.327321Z"
        },
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          "segment_id": 88,
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          "speaker": "",
          "start_time": "00:54:23,982",
          "end_time": "00:54:26,086",
          "text": "Questions have been asked and answered.",
          "created_at": "2025-01-08T22:15:59.367686Z",
          "updated_at": "2025-01-08T22:15:59.367687Z"
        },
        {
          "segment_id": 89,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:54:26,198",
          "end_time": "00:54:27,894",
          "text": "But just on that last point, Ryan.",
          "created_at": "2025-01-08T22:15:59.403994Z",
          "updated_at": "2025-01-08T22:15:59.403994Z"
        },
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          "segment_id": 90,
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          "speaker": "",
          "start_time": "00:54:27,942",
          "end_time": "00:54:32,110",
          "text": "You were making, I'm just wondering, where are we in the evolution of yields there?",
          "created_at": "2025-01-08T22:15:59.493984Z",
          "updated_at": "2025-01-08T22:15:59.493984Z"
        },
        {
          "segment_id": 91,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:54:33,050",
          "end_time": "00:54:35,778",
          "text": "Can those go higher as you continue.",
          "created_at": "2025-01-08T22:15:59.509448Z",
          "updated_at": "2025-01-08T22:15:59.509448Z"
        },
        {
          "segment_id": 92,
          "transcript_id": "8c9f4988-1999-4884-9995-4e732e10a5ff",
          "speaker": "",
          "start_time": "00:54:35,834",
          "end_time": "00:54:40,050",
          "text": "To expand in some of those categories with Visa Direct? And then just in terms of Reg.",
          "created_at": "2025-01-08T22:15:59.537768Z",
          "updated_at": "2025-01-08T22:15:59.537768Z"
        },
        {
          "segment_id": 93,
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          "speaker": "",
          "start_time": "00:54:40,090",
          "end_time": "00:54:43,218",
          "text": "Iii, is the full impact of Reg.",
          "created_at": "2025-01-08T22:15:59.622753Z",
          "updated_at": "2025-01-08T22:15:59.622753Z"
        },
        {
          "segment_id": 94,
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          "speaker": "",
          "start_time": "00:54:43,274",
          "end_time": "00:54:46,322",
          "text": "III now in the run rate or should we expect there to be any.",
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          "text": "Uncertainties related to that? Thank you.",
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          "text": "Yeah, I'll take both of them. On the first one, we're still in the early evolution of the use cases.",
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          "text": "I mean, you know, we weren't even.",
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          "text": "Next question, please.",
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          "text": "Talking about earned wa a couple years ago, you know, Sandra. So as we've got, I think we've got 65 or so use cases now on the platform. Our teams are finding new use cases all the time. So I think we're continuing to see the evolution all that and the economics of all that will play out. What I would point you back to is what I mentioned in my prepared remarks, the tremendous success we're having in Cross Border. You know, we've had great success in selling new use cases and driving Cross Border transaction growth in Visa Direct. As you know, the yields are higher in Cross Border given the value that we add. So again, feel good about all that. Listen, I want to just emphasize in terms of Reg ii, the E Commerce debit market is a very competitive market and is going to be competitive for as far as we can see. So while Chris noted, I think, noted that, you know, the impact has remained the same, we haven't seen any change in impact and I don't. And we're not expecting any change in impact for the fourth quarter. It is a competitive business. We are out there with clients day in and day out, helping them understand the benefits of processing transactions on Visa. And there are a lot of them, which is why we feel good so far in the evolution of Reg III about how we've been able to grow that business. We feel great about the capabilities that a Visa debit transaction offers, many of which I've talked about on these calls in the past. So we're out there, we're competing, we're selling, we're delivering our products, and we feel good about our win rate.",
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          "end_time": "00:56:48,050",
          "text": "Next we'll go to the lineup. Jason Kupferberg from Bank of America, please. Go ahead.",
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          "start_time": "01:03:24,770",
          "end_time": "01:03:34,870",
          "text": "And with that, we'd like to thank you for joining us today. If you have any additional questions, please feel free to call or email our investor relations team. Thanks again and have a great day.",
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          "start_time": "01:03:36,050",
          "end_time": "01:03:45,170",
          "text": "Thank you all for participating in the visa fiscal third quarter 2024 earnings conference call. That concludes today's conference. You may disconnect at this time and please enjoy the rest of your day.",
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          "text": "Thanks, guys. So just a clarification on revenue and then a question on volumes for this fiscal year. So it Sounds like for Q4, you're looking for revenue growth of call it 11 to 12%. I think that would put you at the low end of the low double digit guide you're maintaining for the year. So that's what I wanted to clarify. And then just a question on volumes, I think you said Q4 should be in line with Q3, which I think would bring the full year to around 7% versus the high single digit updated guide last quarter. So just as we start to tune our models for next year, what are some of the potential accelerants off that 7% level we should be considering? Hi Jason, let's unpack that. You had a couple things in there and I just want to, I think this is important. So we'll just be super clear for Q4. My guidance, our guidance for Q4 adjusted net revenue would be low double digits and you know, sort of the directional guidance I also gave is that it'd be slightly above the Q3 level that we reported, which was the 10% growth in the quarter. And so, you know, sort of take that, take those two points and I would triangulate around that and that would still get you sort of to the math of the, you know, the low end of low double digits, as you called it, for the full year. The second point was on drivers from Q3 to Q4. I did say that payment volume, payment transactions, we anticipate Q4 to be consistent with Q3. The one exception to that is in cross border where I did say it'd be slightly below the Q3 levels. And that really is, you know, based on the travel circumstances and situation in Asia that we've talked about extensively with outbound travel in Asia in particular being impacted and recovering slower than we anticipated at the beginning of the year. And so Those are the two variables in terms of the to get the Q4 guidance consistent with the intended intent that I communicated. And then as far as FY25 goes, we're at the beginning end of planning and as we always do, we'll share our expectations on 25 at the end of Q4.",
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          "text": "Next question, please.",
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          "text": "Next we'll go to the line of Dan Perlin from RBC Capital Markets. Please go ahead.",
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          "text": "Thanks. I guess more of a big picture question here, Ryan. So your AI and Genai AI investment you've talked about, I think at conferences, your desire to kind of build out your own large language model. So I'm wondering, one, you know, where do those investments stand today? I guess two, you know, what would be your expectation for early use cases of those investments and kind of the payback period? And then three is there an opportunity to drive like true incremental sales or better outcomes for your merchant constituents as opposed to just the banks. Thanks.",
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          "text": "Yeah.",
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          "text": "Hey Dan, thanks for the question on AI. First of all, I frame it as we are all in on Genai at Visa, as we've been all in on predictive AI for more than a decade. We're applying it in two broad based, different ways. One is adapting across the company to drive productivity and we're seeing real results there. You know, we're seeing great results, great adoption, great productivity increases from technology to accounting to sales all across the company. The second is applying generative AI to enhance the entire payment ecosystem. And you know, to the latter part of your question. Absolutely. You know, I guess I'd give you one set of examples or some of the risk tools and capabilities that we've been deploying in the market. You know, I mentioned the risk products that we're using on RTP and account to account payments. That's a, that is an opportunity to reduce fraud both for merchants and for issuers. I think I mentioned on a previous call we have our Visa provisioning intelligence service which is using artificial intelligence to help predict token provisioning fraud before it happens. That also is a benefit to both issuers and merchants. And the list goes on. So we are very optimistic about the positive impact that generative AI can have not just on our own productivity but on our ability to help drive increased sales and lower fraud across the ecosystem.",
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          "text": "We'll do one more question please.",
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          "text": "For our final question we'll go to the line of Harshita Rawat from Bernstein. Please go ahead.",
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          "text": "Good afternoon, Ryan. Chris, US card volume growth of 5% and surface kind of suggest a little.",
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          "text": "Bit more of a mature market.",
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          "text": "Now I understand the category differences between card volume growth and PC growth which.",
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          "end_time": "01:01:40,780",
          "text": "Influenced the delta here.",
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          "start_time": "01:01:41,400",
          "end_time": "01:01:44,064",
          "text": "Ryan, you discussed your global dam estimate.",
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          "text": "Of $20 trillion in consumer payments for Visa. How should we think about the secular digitization opportunity and the growth algorithm for the US which is your biggest. Thank you. Okay, it was a little hard for us to hear you harshita, but I.",
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          "text": "Think I got the gist of your.",
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          "text": "Question around the growth algorithm for consumer payments, especially in mature markets. So as I've said before, we see more than $20 trillion of opportunity around the world.",
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          "text": "About a quarter of that is in.",
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          "text": "The US by the way.",
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          "text": "And that's cash.",
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          "text": "That's checked. That's ach, that's electronic transactions, that's cards that run on domestic networks and the like. And you know, we're capturing that opportunity through a few different ways. One is continuing to expand acceptance and expand the places where people can use cards. You know, in the US Rent would be a great example. We've been having some really good success penetrating the rent vertical. The second is making it easier to drive E commerce growth and E commerce transactions, which has an outsourced impact on our ability to drive growth on Visa for those types of things. And third, is just continuing to innovate.",
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          "text": "With new products and services that make.",
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          "text": "Our issuers want to issue Visa and consumers want to use them. We announced a full slate of new product innovations at our Visa Payments Forum this year, and those are the types of products that we believe are going to help us win in the marketplace and help us capture and digitize a big chunk of that opportunity on the Visa network.",
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  {
    "call_id": "JPMorgan Q2 24",
    "call_title": "JPMorgan Q2 24 Conference Call",
    "symbol": "JPMorgan Q2 24",
    "start_time": "2025-01-08T22:15:53Z",
    "end_time": "2025-01-08T22:37:46Z",
    "duration": 21,
    "status": "COMPLETED",
    "created_at": "2025-01-08T22:15:53.599988Z",
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      "call_id": "JPMorgan Q2 24",
      "text": " Good morning ladies and gentlemen. Welcome to JPMorgan Chase's second quarter 2024 earnings call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website and please refer to the disclaimer in the back concerning forward looking statements. Please stand by. At this time I would like to turn the call over to JPMorgan Chase's Chief Financial Officer Jeremy Barnum. And Mr. Barnum, please go ahead. 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 $4.4 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 markets 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 give 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 component. 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 incorporate whereas now they are primarily in the relevant line of business. Now Turning to page two for the firmwide 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%. NIIX 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 wholesale onto balance sheet and capital. On page three we ended the quarter with a CT1 ratio of 15.3%, up 30 basis points versus the prior quarter, primarily driven by net income low, 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 four. CCB reported net income of 4.2 billion on 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 in 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. 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 on higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolving fall 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 of $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 five 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. IV fees were up 50% year on year and we ranked number one with year to date wallet share of 9.5% in advisory fees were up 45%, primarily driven by the closing of a few large deals in a weak 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 cost 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 and 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 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 income. 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 eight. Our 2024 guidance, including the drivers remains unchanged from what we said at Investor Day. We continue to expect NII and NII X markets approximately 91 billion, adjusted expense of about 92 billion and on credit card net charge off rate of approximately 3.4% 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 and A. Please stand by. For our first question we'll go to the line of Stephen Chewbacc from Wolff Research. Please go ahead. Hi, good morning, Jeremy. 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 3 endgame and the G SIB surcharge calculations, which I know you've been pushing for for some time as you evaluate just different capital scenarios, are these revisions material enough where they could support a higher normalized ROTC at the firm versus a 17% target? And if so, just how that might impact or inform your appetite for buybacks going forward. Right. Okay now thanks Steve. And actually, before answering the question, I just want to remind everyone that Jamie is not able to join because he has a travel conflict overseas. So it's just going to be me today. Okay, good question on the capital and the rotc. So let me start with the ROTC point first. In short, my answer to that question would be no. It's hard to imagine a scenario coming out of the whole potential range of outcomes on capital that involves an upward revision. On Rob C. If you think about the way we've been talking about this, we've said that before the Basel III endgame proposal we had a 17% cycle target and that while you can imagine a range of different outcomes, the vast majority of them involve expansions of the denominator. And while we had ideas about changing the perimeter and repricing, all of which are still sort of in effect, you know, most of those would be thought of as mitigants rather than things that would actually like increase the rotc. And I don't really think that answer has particularly changed. So as of now, that's what I would say, which is a good pivot to the next point, which is, yeah, we've been reading the same press coverage you've been reading and it's fun and interesting to speculate about the potential outcomes here, but in reality, we don't know anything. You don't know. We don't know how reliable the press coverage is. And so in that sense, I feel like on the overall capital return and buyback trajectory, not much has actually changed relative to what I laid out at Investor Day. The comments that I made then, the comments that Jamie made then, as well as the comments that Jamie made subsequent week at an industry conference. So maybe I'll just briefly summarize for everyone's benefit what we think that is, which is one, we do recognize that our current practice on capital return and buybacks does lead to an ever expanding CET1 ratio. But obviously we're going to run the company over the cycle, over time, at a reasonable CET1 ratio with reasonable buffers relative to our requirements. So after all the uncertainty is sorted out, the question of the deployment of the capital one way or another is a matter of when, not if. On the capital hierarchy, it's also worth noting that's another thing that remains unchanged. So review it quickly. You know, growing the business organically and inorganically, sustainable dividend. And in that context, it's worth noting that the board's announced intention to Increase it to $1.25 is a 19% increase prior to last year. So that's a testament to our performance, and that is a return of capital and then finally buyback. But that hierarchy does not commit US to return 100% of the capital generation in any given quarter. And so, you know, as we sit here today, when you look at the relationship between the opportunity cost of not deploying the capital and the opportunities to deploy the capital outside the firm, it's kind of hard to imagine an environment where that relationship argues more strongly for patients. So given all that, putting it all together, I'm sorry for the long answer. We remain comfortable with the current amount of excess capital, and as Jamie has said, we really continue to think about it as earnings in store as much as anything else. No need to apologize, Jeremy. That was a really helpful perspective. Maybe just for my follow up on nii, you've been very consistent just in flagging the risks related to NII over earning, especially in light of potential deposit attrition as well as repricing headwinds in the second quarter, we did see at least some moderation in repricing pressures. Deposit balances were also more resilient in what's a seasonally weak quarter for deposit growth. So just given the evidence that some deposit pressures appear to be abating, do you see the potential for NII normalizing higher? And where do you think that level could ultimately be in terms of stabilization? Yeah, interesting question, Steve. So let's talk about deposit balances. So yeah, I see your point about how balance pressures are slightly abating when you look at the system as a whole. Just to go through it, QT is still a bit of a headwind. Loan growth is modest and not enough to offset that. And RRP seems to have settled in roughly at its current levels and there are reasons to believe that it might not go down that much more, although that could always change and that could supply extra reserves into the system. But on balance net across all those various effects, we still think that there are net headwinds to deposit balances. So when we think of our balance outlook, we see it as flat to slightly down, maybe with our market share and growth ambitions offsetting those system wide headwinds. So in terms of normalizing higher, I guess it depends on relative to what, but I think it's definitely too early to be sort of calling the end of the over earning narrative or the normalization narrative. Clearly the main difference in our current guidance relative to what we had earlier in the year, which implied a lot more sequential decline, is just the change in the Fed outlook. So two cuts versus six cuts is the main difference there. But obviously based on the latest inflation data and so on, you could easily get back to a situation with a lot more cuts in the yield curve. So we'll see how it goes. And in the end we're kind of focused on just running the place, recognizing and trying not to be distracted by what remains some, some amount of over earning, whatever it is. Understood. Jeremy, thanks so much for taking my questions. Thanks, Steve. Next we'll go to the line of Saul Martinez from hsbc. Please go ahead. Hi, good morning. Thanks for taking my question. Jeremy, can you give an update on the stressed capital buffer? You noted obviously that you think there is an error in the Fed's calculation due to oci? Can you just give us a sense of what the dialogue with the Fed looks like? Is there a process to modify the ECB higher and if you can give us a sense of what that process looks like. Yeah, so I'm not going to comment about any conversations with the Fed, you know, not to confirm or deny that they even exist. You know that stuff is private and you know, so. And then if you, if you talk about like the timing here. Right. So you know that the stress capital buffer that's been released at 3.3% is a preliminary number. By rule, the Fed has to Release that by August 31st. It may come sooner. You know, you talked about an error in the calculation. We haven't used that word. You know, what we know, what we believe rather is that the amount of OCI gain that came through the Fed's disclosed results looked non intuitively high to us. And you know, if you adjust that in ways that we, we think are reasonable, you know, you would get a slightly higher stress capital buffer. Whether the Fed agrees and whether they decide to make that change or not is up to them and you know, know, we'll see what happens. I think the larger point is that if you look at the industry as a whole and if you sort of put us into that with some higher pro forma scb, whatever it might conceivably be, you actually see once again quite a bit of volatility in the year on year change in the stressed capital buffer for many firms. And just sort of reiterating. And another example of what we've said a lot over the years, that it's volatile, it's untransparent, it makes it very hard to manage capital of a bank, it leads to excessively high management buffers. And we think it's really not a great way to do things. So I'll leave it at that. Okay, got it. That's helpful. Just following up on capital returns. On Steve's question, I think you highlighted in response it's a matter of when, not if. And obviously Jamie's not there. He can't speak for Jamie, but seems to have shown limited enthusiasm for a special dividend or buybacks at current valuations. Can you just give us a sense of how you're thinking about the various options? Any updated thoughts on a special dividend and can you do other things like for example, have a material increase in your dividend payout, sort of a step function increase where, you know, keep that flat and grow into that, grow your earnings into that over time. Can you just maybe give us a sense of how you're thinking about what, you know, what options you have available to deploy that you know that capital? Sure, yeah. I mean, I would direct you to read. I'm sure you have Jamie's comments at the industry conference where he participated the week after Investor Day, because he went into a good amount of detail on this stuff addressing some of these points. And I think his comment there about the special dividend was that it's not really our preference. We hear from people that many of our investors wouldn't find that particularly appealing. And he said as much that it wouldn't be sort of our first choice. So I think the larger point is just that a little bit to your question, there are a number of tools in the toolkit and they're really the same tools that are part of our capital hierarchy. So first and foremost, we're looking to deploy the capital into organic or inorganic growth. And then the dividend. I think we're always going to want to keep it in that sort of like sustainable and also sustainable in a stressed environment. So that continues to be the way we think about that. And then at the end of it, it's buybacks. And Jamie's been on the record for over a decade, I think over many shareholder letters, talking about how he thinks about price and buybacks and valuation and price is a factor that's sort of the totality of the set of options, I guess. Okay, great. Thanks a lot. Thanks all. Next we'll go to the line of Ken Uzdin from Jefferies. Please go ahead. Thanks a lot. Good morning, Jeremy. Jeremy, great to see the progress on investment banking fees up sequentially and 50% year over year. And I saw you on the tape earlier just talking about still regulatory concerns a little bit in the advisory space. And we clearly didn't see the debt pull forward play through because your DCM was great. Again, I'm just wondering just where you feel the environment is relative to the potential and just where the dialogue is across the three main bucket areas in terms of how does this feel in terms of a current environment versus a potential environment that we could still see ahead. Thanks. Yeah, thanks, Ken. It's progress, right? I mean, we're happy to see the progress. You know, people have been talking about the depressed banking fee wallet for some time and it's nice to see not only that you're on your pop from a low base, but also a nice sequential improvement. So that's the first thing to say in terms of dialogue and engagement, it's definitely elevated. So, you know, the dialogue on ECM is elevated and the dialogue on M and A is quite robust as well. So all of those are good things that encourage us and make us hopeful that we could be seeing sort of a better trend in this space. But there are some important caveats. So on the DCM side, yeah, we made pull forward comments in the first quarter, but we still feel that this second quarter still reflects a bunch of pull forward and therefore we're reasonably cautious about the second half of the year. Importantly, a lot of the activity is refinancing activity as opposed to for example acquisition finance. So the fact that M and A remains still relatively muted in terms of actual deals has knock on effects on DCM as well. And when a higher percentage of the wallet is refi, then the pull forward risk becomes a little bit higher on ecm. If you look at it kind of at a remove, you might ask the question, given the performance of the overall indices, you would think it would be a really booming environment for IPOs, for example. And while it's improving, it's not quite as good as you would otherwise expect. And that's driven by a variety of factors, including the fact that as has been widely discussed, the extent to which the performance of the large industries is driven by like used stocks, the sort of mid cap tech growth space and other spaces that would typically be driving IPOs have had much more muted performance. Also a lot of the private capital that was raised a couple years ago was raised at pretty high valuations. And so in some cases people looking at IPOs could be looking at down rounds. That's an issue. And while secondary market performance of IPOs has improved meaningfully in some cases people still have concerns about that. So those are a little bit of overhang on that space. I think we can hope that over time that fades away and the trend gets a bit more robust. And yeah, on the advisory side, the regulatory overhang is there, remains there and so we'll just have to see how that plays out. Great, thank you for all that, Jeremy. And just one, on the consumer side, just anything you're noticing in terms of people just have been waiting for this delinquency stabilization. On the credit card side, obviously your loss rates are coming in as you expected and we did see 30 days pretty flat and 90 days come down a little bit. Is that seasonal? Is it just a good rate of change trend? Any thoughts there? Thanks. Yeah, I still feel like when it comes to card charge offs and delinquencies, there's just not much to see there. It's still, it's normalization, not deterioration. It's in line with expectations. You know, as I say, we always look quite closely inside the cohorts, inside the income cohorts. And you know, when you look in there specifically for example on spend patterns, you can see a little bit of evidence of behavior that's consistent with a little bit of weakness in the lower income segments where you see a little bit of rotation of the spend out of discretionary into non discretionary. But the effects are really quite Subtle and in my mind definitely entirely consistent with the type of economic environment that we're seeing, which while very strong and certainly a lot stronger than anyone would have thought given the tightness of monetary conditions, say like they've been predicting it a couple years ago or whatever, you know, you are seeing slightly higher unemployment, you are seeing moderating GDP growth. And so it's not entirely surprising that you're seeing a tiny bit of weakness in some pockets of spend. So it all kind of hangs together in what is in some sense actually not a very interesting story. Thank you. Thanks, Ken. Next we'll go to the line of Glenn Shore from Evercore isi. Please go ahead. Hi, thanks very much. So Jeremy, the discussion so far around private credit and you all your recent comments have been the ability to add on balance sheet and compete when you need to compete on the credit creditfront. And I do think that most of that discussion has been about the direct lending component. So I'm curious if you're showing more progress and activity on that front and then very importantly, do you see the same trend happening on the asset backed finance side? Because that's a bigger part of the world and it's a bigger part of your business. So I'd appreciate your thoughts there. Thanks. Yeah. Thanks, Glenn. So on private credit, so nothing really new to say there. I think. I guess one way the environment's evolving a little bit is that as you know, a lot of money has been raised in private credit funds looking for deals. And sort of a little bit to my prior comments, in a relatively muted acquisition finance environment, you know, at this point you've got a lot of money chasing like not that many deals. So the space is a little bit quieter than it was at the margin. Another interesting thing to note is some of this discussion about kind of lender protections that were typical in the syndicated lever finance market making their way into the private market as well as sort of people realize that even in the private market you probably need some of those protections in some cases, which is sort of supportive of the theme that we've been talking about, about convergence between the direct lending space and the syndicated lending space, which is kind of our core thesis here, which is that we can offer best in class service across the entire continuum, including secondary market trading and so on. So we feel optimistic about our offering there. I think the current environment is maybe a little bit quieter than it was. So it's maybe not a great moment to kind of test whether we're doing a lot more or less in this space. So to speak. And then on asset backed financing, you actually asked me that question before and at the time my answer was that I hadn't heard much about that trend. And that continues to be the case. But clearly there must be something I'm missing. So I can follow up on that and maybe we can have a chat about it. No, it's great for you if you're not hearing much about it, so we could leave it at that. Maybe just one quick follow up in terms of your just overall posturing. You were patient and smart when rates were low, waited to deploy, worked out great. We know that story now. It seems like you have tons of excess liquidity and you're being patient and rates are high. And I'm curious on how you think about what kind of triggers, what kind of things you're looking for in the market to know if and when you would extend duration. Right. I mean, on duration, you know, in truth, we have actually added a little bit of duration over the last couple quarters. So, you know, that's one thing to say that was more last quarter than this quarter. But I guess I would just caution you from a little bit away from looking at kind of our reported cash balances and our balance sheet and concluding that, you know, when you look at the duration concept holistically, that there is a lot to be done differently on the duration fund. So clearly it's true that empirically we've behaved very asset sensitively in this rate hiking cycle and that has resulted in a lot of excess NAI generation on the way up in the near term. But when we look at the firm's overall sensitivity to rates, we look at it through both the ear type lens, the short term NI sensitivity, but also a variety of other lenses, including various types of scenario analysis, including impacts on capital from higher rates. As I think Jamie has said a couple times, we actually aim to be relatively balanced on that front. Also, given like the inverted yield curve, it's not as if extending duration from these levels means that you're locking in 5.5% rates. In fact, the forwards are not that compelling given our views about some sort of structural upward pressures on inflation and so on. So I think when you put that all together, I don't think that kind of a big change in duration posture is a thing that's front of mind for us. Super helpful. Thanks so much for that. Thanks, Glenn. Next we'll go to the line of Matt O'Connor from Deutsche Bank. Please go ahead. Good morning. I was just wondering if you can elaborate on essentially the Math behind the Roxy being too high at 20 and more normalized at 17. Obviously you pointed to over earning on NetII and I guess the question is, is that all of it to go from 20 to 17 and if so, is that all consumer deposit costs or are there a few other components that you could help frame trust? Sure, good question, Matt. I mean, I guess the way I think about it is a couple things like, you know, our returns tend to be a bit seasonal, right? So if you kind of build yourself out a full year forecast and make reasonable just based on your own or analyst consensus, whatever, and you think about fourth quarter, like better to look at this on a full year basis when you think about the returns and the quarterly numbers and you actually have to strip out kind of the one time items. So if you do that like whatever you get for this year is still clearly a number that's higher than the 17%. So yeah, one source of headwinds is normalization of. One source of headwinds is normalization of the NII primarily as a result of expected higher deposit costs. That's, you know, we've talked about that part of it is also the yield curve effects. Some cut will come into the curve at some point. And you know, in the normal course if you kind of do a very, very, very simple mental model of the company, you would have like expenses growing, revenues growing at some organic GDP like rate, maybe higher and expenses growing at a similar slightly lower rate, producing a sort of relatively stable overhead ratio. But even if the amount of NII normalization winds up being less than we might have thought at some prior point, you still have some background, you know, you still have some normalization of the overhead ratio that needs to happen. So as much as you know, our discipline on expense management is, you know, as tight as it always has been, there inflation is still non zero. There are still investments that we're executing. There's still higher expense to come in a slightly flatter revenue environment as a result of in part the normalization of nii. And then the final point is that whatever winds up being the answer on Basel III Endgame and all the other pieces, you have to assume some amount of expansion of the denominator, at least based on what we know so far. So of course any of those pieces could be wrong, but that's kind of how we get to our 17%. And if you look at the various scenarios that we showed on the last page of my Investor Day presentation, it illustrates those dynamics and also how much the range could actually vary as A function of the economic environment and other factors. Yes, that was a really helpful chart. Just one follow up on the yield curve effects, I guess. What do you mean by that? Because right now the yield curve is inverted. Maybe you're still believing in the impact of that, but kind of longer term you'd expect a little bit of steepness of the curve, which I would think would help. But what did you mean by that? Thank you. Yeah, I mean you and I have talked about this before. I guess I sort of, I guess I don't really agree fundamentally with the notion that the way to think about things is that sort of yield curve steepness above and beyond what's priced in by the forwards is a source of structural NII or NEM for banks, if you know what I mean. I mean people have different views about the so called term premium. And obviously in a moment of inverted curve and different types of treasury supply dynamics, people's thinking on that may be changing. But I think we saw when rates were at zero and the 10 year note was below 2%, everyone sort of, many people were kind of tempted to try to get extra NIM and extra NII by extending duration a lot. But when the steepness of the curve implies is driven by the expectation of actually aggressive Fed tightening, it's just a timing issue and you can wind up kind of pretty offsides from the capital and other perspectives. So there are some interesting questions about whether fiscal dynamics might result in a structurally steeper yield curve down the road and whether that could be sort of earning. The term premium, so to speak could be a source of nii, but that feels a bit speculative to me at this point. Got it. Okay, thank you for the details. Thanks, Matt. Next we'll go to the line of Mike Mayo from Wells Fargo Securities. Please go ahead. Hi Jeremy. You said it's too early to end the over earning narrative and you highlighted higher deposit costs and the impact of lower rates and lower NII and DCM pull forward and credit costs going higher. Anything I'm missing in that list and what would cause you to end the over earning narrative? No, actually I think that is the right list, Mike. I mean, frankly, I think one thing that would end the over earning narrative is if our annual returns were closer to 17%. I mean to the extent that that is through the cycle number that we believe and that we're currently producing more than that, that's one very simple way to look at that. But the pieces of that are the pieces that you talked about and the single most important piece is the deposit margin, our deposit margins are well above historical norms and that is a big part of the reason that we still are emphasizing the over earning. You're 17% through the cycle roti an expectation. What is the CET1 ratio that you assume for that? I mean, we would generally assume requirements plus a reasonable buffer, which depending on the shape of rules, could be a little bit smaller, a little bit bigger, in no small part as a function of the volatility of those rules, which goes back to my prior comments on SCB and ccar. But obviously, as you well know, what actually matters is less the ratio and more the dollars. And at this point, the dollars are very much a function of where rules land and where the RWA lands and you know, and obviously things like G SIB recalibration and so on. So we've done, you know, a bunch of scenario analysis along the lines of what I did in Investor Day that informs those numbers. But that is obviously one big element of uncertainty behind that 17%, which is why at Investor Day, when we talked about it, both Daniel and I were quite specific about saying that we thought 17% was still achievable, assuming a reasonable outcome on the Basel III end game. Let me just zoom out for one more question on the return target. I mean, when I asked Jamie at the 2013 Investor Day, you know, would it make Sense to have 13.5% capital? He was basically telling me to take a hike. Right. And now you have 15.3% capital and you're saying, well, we might want to have a lot more capital here. I mean, at some point, if you're spending $17 billion a year to improve the company, if you're gaining share with digital banking, if you're automating the back office, if you're moving ahead with AI, you're doing all these things that I think you say others aren't doing, why wouldn't those returns go higher over time? Or do you just assume you'll be competing those benefits away? Thanks. Yeah. I mean, I think, in short, Mike, you know, we've talked about this a lot and Jamie's talked about this a lot. It's a very, very, very competitive market, you know, and we're very happy with our performance, we're very happy with the share we've taken. And 17% is like an amazing number actually. And to be able to do that, given how robust the competition is from banks, from non banks, from US banks, from foreign banks and all the different businesses that we compete in, is something that we're really proud of. So the number has a range around it, obviously. So it's not a promise, it's not a guarantee, and it can fluctuate. But we're very proud to be in the ballpark of being able to think that we can deliver it again, assuming the reasonable outcome on the puzzle through the end game. But it's a very, very, very competitive market across all of our products and services and regions and client segments. All right, thank you. Next we'll go to the line of Betsy Grasik from Morgan Stanley. Please go ahead. Hi, Jeremy. Hi, Jeremy. So I did want to ask one drill down question on 2Q, and it's related to the dollar amount of buybacks that you did do. I think in the press release right in the slide deck, it's 4.9 billion common stock net repurchases. So the question here is, what's the governor for you on how much to do every quarter? I understand it's a function of, okay, how much do we organically grow? But even with that, so you get the organic growth, which you had some nice movement there, but you do the organic growth and then is it how much do we earn and we want to buy back our earnings or how should we be thinking about what that repurchase volume should be looking like over time? I remember at Investor Day the whole debate around I don't want to buy back my stock, but we are. I get this question from investors quite a bit of how should we be thinking about how you think about what the right amount is to be doing here? Yeah, that's a very good and fair question, Betsy. So let me try to unpack it to the best of my ability. So in no particular order, one thing that we've really tried to emphasize in a number of different settings, including in our recent 10 Qs actually, is that we don't want to get into the business of guiding on buybacks. So we're going to buy back whatever we think makes sense in the current moment, sort of, and we preserve the right to sort of change that at any time. So I recognize that not everyone loves that, but that is kind of a philosophical belief and so I might as well say it explicitly. It was pretty clear in the queue also, but I'm just going to say that again. So that's point one. But having said that, let me nonetheless try to address your point on framework and governors. So generally speaking, we think it doesn't make sense to sort of exit the market entirely unless the conditions are much more unusual than they are. Right now let's say obviously when, for whatever reason, if we ever need to build capital in a hurry, we've done it before and we're always comfortable suspending buybacks entirely. But I think some modest amount of buybacks is a reasonable thing to do when you're generating your kind of capital. And so we were talking before about this 2 billion pace. We kind of trying to move away from this notion of a pace, but that's where that idea comes from, let's put it that way. You talked about the 4.9, which I recognize may seem like a little bit of a random number, but where that actually comes from is the other statement that we made that we have these significant item gains from Visa. And if you think about what that means, it means that we have post the acceptance of the exchange offer a meaningful long position and a liquid large cap financial stock that is Visa, which realistically is highly correlated to our own stock. And so in some sense why carry that instead of just buying back JP Morgan stock? So we talked about, Jamie talked about as we liquidate the Visa, deploying those proceeds into jpm and that's what we did this quarter. So that is why the 4.9 is a little higher. And it's consistent with my comments at Investor Day around having slightly increased the amount of buybacks. And beyond that, what you're left with is my answer to Steve's question, which is that to your point about buying back earnings or whatever, when we're generating these types of earnings and there's this much organic capital being generated in the absence of opportunities to deploy it organically or inorganically and while continuing to maintain our healthy but sustainable dividend, if we don't return the capital, we are going to Keep growing the CT1 ratio to levels which if you think about the long strategic outlook of the company, are not reasonable. They're just artificially high and unnecessary. So one way or the other that will need to be addressed at some point. It's just that we don't feel that now is the right time. All right, thank you, Jeremy, appreciate it. Thanks, Betsy. Next we'll go to the line of Gerard Cassidy from RBC Capital Markets. Please go ahead. Hi Jeremy, how are you? Hi, Gerard. Jeremy, can you. I know you touched on deposits earlier in the call in response to a question I noticed on the average balances, the non interest bearing deposits were relatively stable quarter to quarter versus prior quarters when they have steadily declined. And this is one of the areas of course, investors are focused on in terms of the future of the Net interest margin for you and your peers. Can you elaborate if you can, what you're seeing in that non interest bearing deposit account? I know this is average and not period and the period end number may actually be lower, but what are you guys seeing here? Yeah, good question, Gerard. I have to be honest, I hadn't focused on that particular sequential explain that is quarter on quarter change and average non interest bearing deposits. But I think the more important question is the big picture question, which is what do we expect? How are we thinking about ongoing migration of non interest bearing into interest bearing in the current environment and how that affects our RNI outlook and our expectation for weighted average rate paid on deposits? And the answer to that question is that we do continue to expect that migration to happen. So if you think about it, you know, in the wholesale space, you know, you have a bunch of clients with some balances in non interest bearing accounts and over time for a variety of reasons we do see them moving those balances into interest bearing. So we do continue to expect that migration to happen and therefore that will be a source of headwinds. And you know that migration sometimes happens internally, that is out of non interest bearing into interest bearing or into CDs, sometimes it goes into money markets or into investments which is what we see happening in our wealth management business. And you know, some of it does leave the company. But one of the things that we're encouraged by is the extent to which we are actually capturing a large portion of that yield seeking flow through CDs and money market offerings, et cetera, across our various franchises. So big picture, I do think that migration out of non interest bearing into interest bearing will continue to be a thing and that is a contributor to the modest headwinds that we expect for NII right now. But yeah, I'll leave it at that I guess. Very good. And as a follow up, you've been very clear about the consumer credit card charge offs and delinquency levels. And we all know about the commercial real estate office and you always talk about over earning on net interest income. Of course one of the great credit quality stories for everyone, including yourselves, is the CNI portfolio. How strong it's been in this elevated rate environment. I know your numbers are still quite low, but there in the corporate investment bank you had about a $500 million pickup in non accrual loans. Can you share with us what are you seeing in cni? Are there any early signs of cracks or anything? And again, I know your numbers are still good, but I'm just Trying to look forward to see if there's something here over the next 12 months or so. Yeah, it's a good question. I think the short answer is no. We're not really seeing early signs of cracks in cni. I mean, yes, I agree with you. Like the CNI charge off rate has been very, very low for a long time. I think we emphasized that at last year's Investor Day, if I remember correctly. I think the CNI charge off rate over the preceding 10 years was something like literally zero. So that is clearly very low by historical standards. And while we take a lot of pride in that number, and I think it reflects the discipline and our underwriting process and the strength of our, of our credit culture across bankers and the risk team, we don't actually run that franchise to like a zero loss expectation. So you have to assume there'll be some upward pressure on that. But, you know, in any given quarter, the CNI numbers tend to be quite lumpy and quite idiosyncratic. So I don't think that anything in the current quarter results is indicative of anything broader. And I haven't heard anyone internally talk that way. I would say great. Appreciate the insights as always. Thank you. Thanks, Gerard. Next we'll go to the line of Erika Najarian from ubs. Please go ahead. Hi, good morning. I just had one cleanup question, Jeremy. The consensus provision for 2024 is 10.7 billion. Could you maybe clarif for once and for all, sort of Jamie's comments at an industry conference earlier and you know, try to sort of triangulate if that 10.7 billion provision is appropriate for the growth level that you are planning for in card. Yeah, happy to clarify that. So Jamie's comments were that the allowance, the build and the card allowance, we're talking about card specifically, we expected something like 2 billion for the full year. As I said here today, our expectation for that number is actually slightly higher, but, you know, it's in the ballpark. And I think in terms of what that means for the consensus on the overall allowance change for the year, you know, last time I checked it still looked a little low on that front, so who knows what it'll actually wind up being. But that remains our view. One question that we've gotten is how to reconcile that build to the 12% growth in OS that we've talked about, because it seems like a little bit high relative to what you would have otherwise assumed if you apply some sort of a standard coverage ratio to that growth. But the reason that's the Case is essentially a combination of higher revolving mix as we continue to see some normalization revolve in that 12% as well as seasoning of earlier vintages which comes with slightly higher allowance per unit of OS growth. Great, thank you. Thanks Erica. And for our final question we'll go to the line of Jim Mitchell from Seaport Global Securities. Please go ahead. Hey, good morning. Maybe just one last question on sort of deploying excess capital. Seems like the two primary ways to do that organically would be through the trading book or the loan book. So maybe two questions there. One, trading assets were up 20% year over year. Is that you leaning into it or just a function of demand and is there further opportunities to grow that? And then secondly, outside of cards, loan demand has been quite weak. And any thoughts from you on if you're seeing any change in demand or how you're thinking about loan demand going forward? Thanks. Thanks Jim. Good question. So yeah, trading assets have been up. That is basically client activity, primarily secure financing related sort of match book repo type stuff and similar things that are gross up the balance sheet quite a bit but are quite low risk and therefore quite low RWA intensity. So while our ability to supply that financing to clients is something that we're happy about and it very much represents us leaning into the franchise to serve our clients, it's not really particularly RWA and therefore capital intensive and therefore it doesn't really reflect an aggressive choice on our part to deploy capital, so to speak, on the loan demand front. Yeah, I mean, unfortunately I just don't have much new to say there on loan demand. Meaning to your point, loan demand remains quite muted everywhere except card. Our card business is of course, course in no way capital constrained. So whatever growth makes sense there in terms of our customer franchise and our ability to acquire accounts and retain accounts and what fits inside our credit risk appetite is growth that's going to make sense. And so we're very happy to deploy capital to that, but it's not constrained by our willingness or ability to deploy capital to that. And of course, you know, for the rest of the loan space, the last thing that we're going to do is have the excess capital mean that we lean in to, you know, lending that is not inside our risk appetite or inside our credit box. You know, especially in a world where spreads are quite compressed and terms are under pressure. So there's always a balance between capital deployment and, you know, assessing economic risk rationally. And frankly that is in some sense a microcosm of the larger challenge that we have right now. You know, when I talked about if there was ever a moment where the opportunity cost of not deploying the capital relative to how attractive the opportunities outside the walls of the company are, now would be it. In terms of being patient, that's a little bit one example of what I was referring to. Right. Okay, great. Thanks. Thanks, Jim. And we have no further questions. Very good. Thank you, everyone. See you next quarter. Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.",
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          "text": "Good morning ladies and gentlemen. Welcome to JPMorgan Chase's second quarter 2024 earnings call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website and please refer to the disclaimer in the back concerning forward looking statements. Please stand by. At this time I would like to turn the call over to JPMorgan Chase's Chief Financial Officer Jeremy Barnum. And Mr. Barnum, please go ahead. 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 $4.4 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 markets 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 give 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 component. 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 incorporate whereas now they are primarily in the relevant line of business. Now Turning to page two for the firmwide 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%. NIIX 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 wholesale onto balance sheet and capital. On page three we ended the quarter with a CT1 ratio of 15.3%, up 30 basis points versus the prior quarter, primarily driven by net income low, 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 four. CCB reported net income of 4.2 billion on 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 in 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. 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 on higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolving fall 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 of $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 five 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. IV fees were up 50% year on year and we ranked number one with year to date wallet share of 9.5% in advisory fees were up 45%, primarily driven by the closing of a few large deals in a weak 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 cost 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 and 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 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 income. 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 eight. Our 2024 guidance, including the drivers remains unchanged from what we said at Investor Day. We continue to expect NII and NII X markets approximately 91 billion, adjusted expense of about 92 billion and on credit card net charge off rate of approximately 3.4% 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 and A. Please stand by. For our first question we'll go to the line of Stephen Chewbacc from Wolff Research. Please go ahead. Hi, good morning, Jeremy. 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 3 endgame and the G SIB surcharge calculations, which I know you've been pushing for for some time as you evaluate just different capital scenarios, are these revisions material enough where they could support a higher normalized ROTC at the firm versus a 17% target? And if so, just how that might impact or inform your appetite for buybacks going forward. Right. Okay now thanks Steve. And actually, before answering the question, I just want to remind everyone that Jamie is not able to join because he has a travel conflict overseas. So it's just going to be me today. Okay, good question on the capital and the rotc. So let me start with the ROTC point first. In short, my answer to that question would be no. It's hard to imagine a scenario coming out of the whole potential range of outcomes on capital that involves an upward revision. On Rob C. If you think about the way we've been talking about this, we've said that before the Basel III endgame proposal we had a 17% cycle target and that while you can imagine a range of different outcomes, the vast majority of them involve expansions of the denominator. And while we had ideas about changing the perimeter and repricing, all of which are still sort of in effect, you know, most of those would be thought of as mitigants rather than things that would actually like increase the rotc. And I don't really think that answer has particularly changed. So as of now, that's what I would say, which is a good pivot to the next point, which is, yeah, we've been reading the same press coverage you've been reading and it's fun and interesting to speculate about the potential outcomes here, but in reality, we don't know anything. You don't know. We don't know how reliable the press coverage is. And so in that sense, I feel like on the overall capital return and buyback trajectory, not much has actually changed relative to what I laid out at Investor Day. The comments that I made then, the comments that Jamie made then, as well as the comments that Jamie made subsequent week at an industry conference. So maybe I'll just briefly summarize for everyone's benefit what we think that is, which is one, we do recognize that our current practice on capital return and buybacks does lead to an ever expanding CET1 ratio. But obviously we're going to run the company over the cycle, over time, at a reasonable CET1 ratio with reasonable buffers relative to our requirements. So after all the uncertainty is sorted out, the question of the deployment of the capital one way or another is a matter of when, not if. On the capital hierarchy, it's also worth noting that's another thing that remains unchanged. So review it quickly. You know, growing the business organically and inorganically, sustainable dividend. And in that context, it's worth noting that the board's announced intention to Increase it to $1.25 is a 19% increase prior to last year. So that's a testament to our performance, and that is a return of capital and then finally buyback. But that hierarchy does not commit US to return 100% of the capital generation in any given quarter. And so, you know, as we sit here today, when you look at the relationship between the opportunity cost of not deploying the capital and the opportunities to deploy the capital outside the firm, it's kind of hard to imagine an environment where that relationship argues more strongly for patients. So given all that, putting it all together, I'm sorry for the long answer. We remain comfortable with the current amount of excess capital, and as Jamie has said, we really continue to think about it as earnings in store as much as anything else. No need to apologize, Jeremy. That was a really helpful perspective. Maybe just for my follow up on nii, you've been very consistent just in flagging the risks related to NII over earning, especially in light of potential deposit attrition as well as repricing headwinds in the second quarter, we did see at least some moderation in repricing pressures. Deposit balances were also more resilient in what's a seasonally weak quarter for deposit growth. So just given the evidence that some deposit pressures appear to be abating, do you see the potential for NII normalizing higher? And where do you think that level could ultimately be in terms of stabilization? Yeah, interesting question, Steve. So let's talk about deposit balances. So yeah, I see your point about how balance pressures are slightly abating when you look at the system as a whole. Just to go through it, QT is still a bit of a headwind. Loan growth is modest and not enough to offset that. And RRP seems to have settled in roughly at its current levels and there are reasons to believe that it might not go down that much more, although that could always change and that could supply extra reserves into the system. But on balance net across all those various effects, we still think that there are net headwinds to deposit balances. So when we think of our balance outlook, we see it as flat to slightly down, maybe with our market share and growth ambitions offsetting those system wide headwinds. So in terms of normalizing higher, I guess it depends on relative to what, but I think it's definitely too early to be sort of calling the end of the over earning narrative or the normalization narrative. Clearly the main difference in our current guidance relative to what we had earlier in the year, which implied a lot more sequential decline, is just the change in the Fed outlook. So two cuts versus six cuts is the main difference there. But obviously based on the latest inflation data and so on, you could easily get back to a situation with a lot more cuts in the yield curve. So we'll see how it goes. And in the end we're kind of focused on just running the place, recognizing and trying not to be distracted by what remains some, some amount of over earning, whatever it is. Understood. Jeremy, thanks so much for taking my questions. Thanks, Steve. Next we'll go to the line of Saul Martinez from hsbc. Please go ahead. Hi, good morning. Thanks for taking my question. Jeremy, can you give an update on the stressed capital buffer? You noted obviously that you think there is an error in the Fed's calculation due to oci? Can you just give us a sense of what the dialogue with the Fed looks like? Is there a process to modify the ECB higher and if you can give us a sense of what that process looks like. Yeah, so I'm not going to comment about any conversations with the Fed, you know, not to confirm or deny that they even exist. You know that stuff is private and you know, so. And then if you, if you talk about like the timing here. Right. So you know that the stress capital buffer that's been released at 3.3% is a preliminary number. By rule, the Fed has to Release that by August 31st. It may come sooner. You know, you talked about an error in the calculation. We haven't used that word. You know, what we know, what we believe rather is that the amount of OCI gain that came through the Fed's disclosed results looked non intuitively high to us. And you know, if you adjust that in ways that we, we think are reasonable, you know, you would get a slightly higher stress capital buffer. Whether the Fed agrees and whether they decide to make that change or not is up to them and you know, know, we'll see what happens. I think the larger point is that if you look at the industry as a whole and if you sort of put us into that with some higher pro forma scb, whatever it might conceivably be, you actually see once again quite a bit of volatility in the year on year change in the stressed capital buffer for many firms. And just sort of reiterating. And another example of what we've said a lot over the years, that it's volatile, it's untransparent, it makes it very hard to manage capital of a bank, it leads to excessively high management buffers. And we think it's really not a great way to do things. So I'll leave it at that. Okay, got it. That's helpful. Just following up on capital returns. On Steve's question, I think you highlighted in response it's a matter of when, not if. And obviously Jamie's not there. He can't speak for Jamie, but seems to have shown limited enthusiasm for a special dividend or buybacks at current valuations. Can you just give us a sense of how you're thinking about the various options? Any updated thoughts on a special dividend and can you do other things like for example, have a material increase in your dividend payout, sort of a step function increase where, you know, keep that flat and grow into that, grow your earnings into that over time. Can you just maybe give us a sense of how you're thinking about what, you know, what options you have available to deploy that you know that capital? Sure, yeah. I mean, I would direct you to read. I'm sure you have Jamie's comments at the industry conference where he participated the week after Investor Day, because he went into a good amount of detail on this stuff addressing some of these points. And I think his comment there about the special dividend was that it's not really our preference. We hear from people that many of our investors wouldn't find that particularly appealing. And he said as much that it wouldn't be sort of our first choice. So I think the larger point is just that a little bit to your question, there are a number of tools in the toolkit and they're really the same tools that are part of our capital hierarchy. So first and foremost, we're looking to deploy the capital into organic or inorganic growth. And then the dividend. I think we're always going to want to keep it in that sort of like sustainable and also sustainable in a stressed environment. So that continues to be the way we think about that. And then at the end of it, it's buybacks. And Jamie's been on the record for over a decade, I think over many shareholder letters, talking about how he thinks about price and buybacks and valuation and price is a factor that's sort of the totality of the set of options, I guess. Okay, great. Thanks a lot. Thanks all. Next we'll go to the line of Ken Uzdin from Jefferies. Please go ahead. Thanks a lot. Good morning, Jeremy. Jeremy, great to see the progress on investment banking fees up sequentially and 50% year over year. And I saw you on the tape earlier just talking about still regulatory concerns a little bit in the advisory space. And we clearly didn't see the debt pull forward play through because your DCM was great. Again, I'm just wondering just where you feel the environment is relative to the potential and just where the dialogue is across the three main bucket areas in terms of how does this feel in terms of a current environment versus a potential environment that we could still see ahead. Thanks. Yeah, thanks, Ken. It's progress, right? I mean, we're happy to see the progress. You know, people have been talking about the depressed banking fee wallet for some time and it's nice to see not only that you're on your pop from a low base, but also a nice sequential improvement. So that's the first thing to say in terms of dialogue and engagement, it's definitely elevated. So, you know, the dialogue on ECM is elevated and the dialogue on M and A is quite robust as well. So all of those are good things that encourage us and make us hopeful that we could be seeing sort of a better trend in this space. But there are some important caveats. So on the DCM side, yeah, we made pull forward comments in the first quarter, but we still feel that this second quarter still reflects a bunch of pull forward and therefore we're reasonably cautious about the second half of the year. Importantly, a lot of the activity is refinancing activity as opposed to for example acquisition finance. So the fact that M and A remains still relatively muted in terms of actual deals has knock on effects on DCM as well. And when a higher percentage of the wallet is refi, then the pull forward risk becomes a little bit higher on ecm. If you look at it kind of at a remove, you might ask the question, given the performance of the overall indices, you would think it would be a really booming environment for IPOs, for example. And while it's improving, it's not quite as good as you would otherwise expect. And that's driven by a variety of factors, including the fact that as has been widely discussed, the extent to which the performance of the large industries is driven by like used stocks, the sort of mid cap tech growth space and other spaces that would typically be driving IPOs have had much more muted performance. Also a lot of the private capital that was raised a couple years ago was raised at pretty high valuations. And so in some cases people looking at IPOs could be looking at down rounds. That's an issue. And while secondary market performance of IPOs has improved meaningfully in some cases people still have concerns about that. So those are a little bit of overhang on that space. I think we can hope that over time that fades away and the trend gets a bit more robust. And yeah, on the advisory side, the regulatory overhang is there, remains there and so we'll just have to see how that plays out. Great, thank you for all that, Jeremy. And just one, on the consumer side, just anything you're noticing in terms of people just have been waiting for this delinquency stabilization. On the credit card side, obviously your loss rates are coming in as you expected and we did see 30 days pretty flat and 90 days come down a little bit. Is that seasonal? Is it just a good rate of change trend? Any thoughts there? Thanks. Yeah, I still feel like when it comes to card charge offs and delinquencies, there's just not much to see there. It's still, it's normalization, not deterioration. It's in line with expectations. You know, as I say, we always look quite closely inside the cohorts, inside the income cohorts. And you know, when you look in there specifically for example on spend patterns, you can see a little bit of evidence of behavior that's consistent with a little bit of weakness in the lower income segments where you see a little bit of rotation of the spend out of discretionary into non discretionary. But the effects are really quite Subtle and in my mind definitely entirely consistent with the type of economic environment that we're seeing, which while very strong and certainly a lot stronger than anyone would have thought given the tightness of monetary conditions, say like they've been predicting it a couple years ago or whatever, you know, you are seeing slightly higher unemployment, you are seeing moderating GDP growth. And so it's not entirely surprising that you're seeing a tiny bit of weakness in some pockets of spend. So it all kind of hangs together in what is in some sense actually not a very interesting story. Thank you. Thanks, Ken. Next we'll go to the line of Glenn Shore from Evercore isi. Please go ahead. Hi, thanks very much. So Jeremy, the discussion so far around private credit and you all your recent comments have been the ability to add on balance sheet and compete when you need to compete on the credit creditfront. And I do think that most of that discussion has been about the direct lending component. So I'm curious if you're showing more progress and activity on that front and then very importantly, do you see the same trend happening on the asset backed finance side? Because that's a bigger part of the world and it's a bigger part of your business. So I'd appreciate your thoughts there. Thanks. Yeah. Thanks, Glenn. So on private credit, so nothing really new to say there. I think. I guess one way the environment's evolving a little bit is that as you know, a lot of money has been raised in private credit funds looking for deals. And sort of a little bit to my prior comments, in a relatively muted acquisition finance environment, you know, at this point you've got a lot of money chasing like not that many deals. So the space is a little bit quieter than it was at the margin. Another interesting thing to note is some of this discussion about kind of lender protections that were typical in the syndicated lever finance market making their way into the private market as well as sort of people realize that even in the private market you probably need some of those protections in some cases, which is sort of supportive of the theme that we've been talking about, about convergence between the direct lending space and the syndicated lending space, which is kind of our core thesis here, which is that we can offer best in class service across the entire continuum, including secondary market trading and so on. So we feel optimistic about our offering there. I think the current environment is maybe a little bit quieter than it was. So it's maybe not a great moment to kind of test whether we're doing a lot more or less in this space. So to speak. And then on asset backed financing, you actually asked me that question before and at the time my answer was that I hadn't heard much about that trend. And that continues to be the case. But clearly there must be something I'm missing. So I can follow up on that and maybe we can have a chat about it. No, it's great for you if you're not hearing much about it, so we could leave it at that. Maybe just one quick follow up in terms of your just overall posturing. You were patient and smart when rates were low, waited to deploy, worked out great. We know that story now. It seems like you have tons of excess liquidity and you're being patient and rates are high. And I'm curious on how you think about what kind of triggers, what kind of things you're looking for in the market to know if and when you would extend duration. Right. I mean, on duration, you know, in truth, we have actually added a little bit of duration over the last couple quarters. So, you know, that's one thing to say that was more last quarter than this quarter. But I guess I would just caution you from a little bit away from looking at kind of our reported cash balances and our balance sheet and concluding that, you know, when you look at the duration concept holistically, that there is a lot to be done differently on the duration fund. So clearly it's true that empirically we've behaved very asset sensitively in this rate hiking cycle and that has resulted in a lot of excess NAI generation on the way up in the near term. But when we look at the firm's overall sensitivity to rates, we look at it through both the ear type lens, the short term NI sensitivity, but also a variety of other lenses, including various types of scenario analysis, including impacts on capital from higher rates. As I think Jamie has said a couple times, we actually aim to be relatively balanced on that front. Also, given like the inverted yield curve, it's not as if extending duration from these levels means that you're locking in 5.5% rates. In fact, the forwards are not that compelling given our views about some sort of structural upward pressures on inflation and so on. So I think when you put that all together, I don't think that kind of a big change in duration posture is a thing that's front of mind for us. Super helpful. Thanks so much for that. Thanks, Glenn. Next we'll go to the line of Matt O'Connor from Deutsche Bank. Please go ahead. Good morning. I was just wondering if you can elaborate on essentially the Math behind the Roxy being too high at 20 and more normalized at 17. Obviously you pointed to over earning on NetII and I guess the question is, is that all of it to go from 20 to 17 and if so, is that all consumer deposit costs or are there a few other components that you could help frame trust? Sure, good question, Matt. I mean, I guess the way I think about it is a couple things like, you know, our returns tend to be a bit seasonal, right? So if you kind of build yourself out a full year forecast and make reasonable just based on your own or analyst consensus, whatever, and you think about fourth quarter, like better to look at this on a full year basis when you think about the returns and the quarterly numbers and you actually have to strip out kind of the one time items. So if you do that like whatever you get for this year is still clearly a number that's higher than the 17%. So yeah, one source of headwinds is normalization of. One source of headwinds is normalization of the NII primarily as a result of expected higher deposit costs. That's, you know, we've talked about that part of it is also the yield curve effects. Some cut will come into the curve at some point. And you know, in the normal course if you kind of do a very, very, very simple mental model of the company, you would have like expenses growing, revenues growing at some organic GDP like rate, maybe higher and expenses growing at a similar slightly lower rate, producing a sort of relatively stable overhead ratio. But even if the amount of NII normalization winds up being less than we might have thought at some prior point, you still have some background, you know, you still have some normalization of the overhead ratio that needs to happen. So as much as you know, our discipline on expense management is, you know, as tight as it always has been, there inflation is still non zero. There are still investments that we're executing. There's still higher expense to come in a slightly flatter revenue environment as a result of in part the normalization of nii. And then the final point is that whatever winds up being the answer on Basel III Endgame and all the other pieces, you have to assume some amount of expansion of the denominator, at least based on what we know so far. So of course any of those pieces could be wrong, but that's kind of how we get to our 17%. And if you look at the various scenarios that we showed on the last page of my Investor Day presentation, it illustrates those dynamics and also how much the range could actually vary as A function of the economic environment and other factors. Yes, that was a really helpful chart. Just one follow up on the yield curve effects, I guess. What do you mean by that? Because right now the yield curve is inverted. Maybe you're still believing in the impact of that, but kind of longer term you'd expect a little bit of steepness of the curve, which I would think would help. But what did you mean by that? Thank you. Yeah, I mean you and I have talked about this before. I guess I sort of, I guess I don't really agree fundamentally with the notion that the way to think about things is that sort of yield curve steepness above and beyond what's priced in by the forwards is a source of structural NII or NEM for banks, if you know what I mean. I mean people have different views about the so called term premium. And obviously in a moment of inverted curve and different types of treasury supply dynamics, people's thinking on that may be changing. But I think we saw when rates were at zero and the 10 year note was below 2%, everyone sort of, many people were kind of tempted to try to get extra NIM and extra NII by extending duration a lot. But when the steepness of the curve implies is driven by the expectation of actually aggressive Fed tightening, it's just a timing issue and you can wind up kind of pretty offsides from the capital and other perspectives. So there are some interesting questions about whether fiscal dynamics might result in a structurally steeper yield curve down the road and whether that could be sort of earning. The term premium, so to speak could be a source of nii, but that feels a bit speculative to me at this point. Got it. Okay, thank you for the details. Thanks, Matt. Next we'll go to the line of Mike Mayo from Wells Fargo Securities. Please go ahead. Hi Jeremy. You said it's too early to end the over earning narrative and you highlighted higher deposit costs and the impact of lower rates and lower NII and DCM pull forward and credit costs going higher. Anything I'm missing in that list and what would cause you to end the over earning narrative? No, actually I think that is the right list, Mike. I mean, frankly, I think one thing that would end the over earning narrative is if our annual returns were closer to 17%. I mean to the extent that that is through the cycle number that we believe and that we're currently producing more than that, that's one very simple way to look at that. But the pieces of that are the pieces that you talked about and the single most important piece is the deposit margin, our deposit margins are well above historical norms and that is a big part of the reason that we still are emphasizing the over earning. You're 17% through the cycle roti an expectation. What is the CET1 ratio that you assume for that? I mean, we would generally assume requirements plus a reasonable buffer, which depending on the shape of rules, could be a little bit smaller, a little bit bigger, in no small part as a function of the volatility of those rules, which goes back to my prior comments on SCB and ccar. But obviously, as you well know, what actually matters is less the ratio and more the dollars. And at this point, the dollars are very much a function of where rules land and where the RWA lands and you know, and obviously things like G SIB recalibration and so on. So we've done, you know, a bunch of scenario analysis along the lines of what I did in Investor Day that informs those numbers. But that is obviously one big element of uncertainty behind that 17%, which is why at Investor Day, when we talked about it, both Daniel and I were quite specific about saying that we thought 17% was still achievable, assuming a reasonable outcome on the Basel III end game. Let me just zoom out for one more question on the return target. I mean, when I asked Jamie at the 2013 Investor Day, you know, would it make Sense to have 13.5% capital? He was basically telling me to take a hike. Right. And now you have 15.3% capital and you're saying, well, we might want to have a lot more capital here. I mean, at some point, if you're spending $17 billion a year to improve the company, if you're gaining share with digital banking, if you're automating the back office, if you're moving ahead with AI, you're doing all these things that I think you say others aren't doing, why wouldn't those returns go higher over time? Or do you just assume you'll be competing those benefits away? Thanks. Yeah. I mean, I think, in short, Mike, you know, we've talked about this a lot and Jamie's talked about this a lot. It's a very, very, very competitive market, you know, and we're very happy with our performance, we're very happy with the share we've taken. And 17% is like an amazing number actually. And to be able to do that, given how robust the competition is from banks, from non banks, from US banks, from foreign banks and all the different businesses that we compete in, is something that we're really proud of. So the number has a range around it, obviously. So it's not a promise, it's not a guarantee, and it can fluctuate. But we're very proud to be in the ballpark of being able to think that we can deliver it again, assuming the reasonable outcome on the puzzle through the end game. But it's a very, very, very competitive market across all of our products and services and regions and client segments. All right, thank you. Next we'll go to the line of Betsy Grasik from Morgan Stanley. Please go ahead. Hi, Jeremy. Hi, Jeremy. So I did want to ask one drill down question on 2Q, and it's related to the dollar amount of buybacks that you did do. I think in the press release right in the slide deck, it's 4.9 billion common stock net repurchases. So the question here is, what's the governor for you on how much to do every quarter? I understand it's a function of, okay, how much do we organically grow? But even with that, so you get the organic growth, which you had some nice movement there, but you do the organic growth and then is it how much do we earn and we want to buy back our earnings or how should we be thinking about what that repurchase volume should be looking like over time? I remember at Investor Day the whole debate around I don't want to buy back my stock, but we are. I get this question from investors quite a bit of how should we be thinking about how you think about what the right amount is to be doing here? Yeah, that's a very good and fair question, Betsy. So let me try to unpack it to the best of my ability. So in no particular order, one thing that we've really tried to emphasize in a number of different settings, including in our recent 10 Qs actually, is that we don't want to get into the business of guiding on buybacks. So we're going to buy back whatever we think makes sense in the current moment, sort of, and we preserve the right to sort of change that at any time. So I recognize that not everyone loves that, but that is kind of a philosophical belief and so I might as well say it explicitly. It was pretty clear in the queue also, but I'm just going to say that again. So that's point one. But having said that, let me nonetheless try to address your point on framework and governors. So generally speaking, we think it doesn't make sense to sort of exit the market entirely unless the conditions are much more unusual than they are. Right now let's say obviously when, for whatever reason, if we ever need to build capital in a hurry, we've done it before and we're always comfortable suspending buybacks entirely. But I think some modest amount of buybacks is a reasonable thing to do when you're generating your kind of capital. And so we were talking before about this 2 billion pace. We kind of trying to move away from this notion of a pace, but that's where that idea comes from, let's put it that way. You talked about the 4.9, which I recognize may seem like a little bit of a random number, but where that actually comes from is the other statement that we made that we have these significant item gains from Visa. And if you think about what that means, it means that we have post the acceptance of the exchange offer a meaningful long position and a liquid large cap financial stock that is Visa, which realistically is highly correlated to our own stock. And so in some sense why carry that instead of just buying back JP Morgan stock? So we talked about, Jamie talked about as we liquidate the Visa, deploying those proceeds into jpm and that's what we did this quarter. So that is why the 4.9 is a little higher. And it's consistent with my comments at Investor Day around having slightly increased the amount of buybacks. And beyond that, what you're left with is my answer to Steve's question, which is that to your point about buying back earnings or whatever, when we're generating these types of earnings and there's this much organic capital being generated in the absence of opportunities to deploy it organically or inorganically and while continuing to maintain our healthy but sustainable dividend, if we don't return the capital, we are going to Keep growing the CT1 ratio to levels which if you think about the long strategic outlook of the company, are not reasonable. They're just artificially high and unnecessary. So one way or the other that will need to be addressed at some point. It's just that we don't feel that now is the right time. All right, thank you, Jeremy, appreciate it. Thanks, Betsy. Next we'll go to the line of Gerard Cassidy from RBC Capital Markets. Please go ahead. Hi Jeremy, how are you? Hi, Gerard. Jeremy, can you. I know you touched on deposits earlier in the call in response to a question I noticed on the average balances, the non interest bearing deposits were relatively stable quarter to quarter versus prior quarters when they have steadily declined. And this is one of the areas of course, investors are focused on in terms of the future of the Net interest margin for you and your peers. Can you elaborate if you can, what you're seeing in that non interest bearing deposit account? I know this is average and not period and the period end number may actually be lower, but what are you guys seeing here? Yeah, good question, Gerard. I have to be honest, I hadn't focused on that particular sequential explain that is quarter on quarter change and average non interest bearing deposits. But I think the more important question is the big picture question, which is what do we expect? How are we thinking about ongoing migration of non interest bearing into interest bearing in the current environment and how that affects our RNI outlook and our expectation for weighted average rate paid on deposits? And the answer to that question is that we do continue to expect that migration to happen. So if you think about it, you know, in the wholesale space, you know, you have a bunch of clients with some balances in non interest bearing accounts and over time for a variety of reasons we do see them moving those balances into interest bearing. So we do continue to expect that migration to happen and therefore that will be a source of headwinds. And you know that migration sometimes happens internally, that is out of non interest bearing into interest bearing or into CDs, sometimes it goes into money markets or into investments which is what we see happening in our wealth management business. And you know, some of it does leave the company. But one of the things that we're encouraged by is the extent to which we are actually capturing a large portion of that yield seeking flow through CDs and money market offerings, et cetera, across our various franchises. So big picture, I do think that migration out of non interest bearing into interest bearing will continue to be a thing and that is a contributor to the modest headwinds that we expect for NII right now. But yeah, I'll leave it at that I guess. Very good. And as a follow up, you've been very clear about the consumer credit card charge offs and delinquency levels. And we all know about the commercial real estate office and you always talk about over earning on net interest income. Of course one of the great credit quality stories for everyone, including yourselves, is the CNI portfolio. How strong it's been in this elevated rate environment. I know your numbers are still quite low, but there in the corporate investment bank you had about a $500 million pickup in non accrual loans. Can you share with us what are you seeing in cni? Are there any early signs of cracks or anything? And again, I know your numbers are still good, but I'm just Trying to look forward to see if there's something here over the next 12 months or so. Yeah, it's a good question. I think the short answer is no. We're not really seeing early signs of cracks in cni. I mean, yes, I agree with you. Like the CNI charge off rate has been very, very low for a long time. I think we emphasized that at last year's Investor Day, if I remember correctly. I think the CNI charge off rate over the preceding 10 years was something like literally zero. So that is clearly very low by historical standards. And while we take a lot of pride in that number, and I think it reflects the discipline and our underwriting process and the strength of our, of our credit culture across bankers and the risk team, we don't actually run that franchise to like a zero loss expectation. So you have to assume there'll be some upward pressure on that. But, you know, in any given quarter, the CNI numbers tend to be quite lumpy and quite idiosyncratic. So I don't think that anything in the current quarter results is indicative of anything broader. And I haven't heard anyone internally talk that way. I would say great. Appreciate the insights as always. Thank you. Thanks, Gerard. Next we'll go to the line of Erika Najarian from ubs. Please go ahead. Hi, good morning. I just had one cleanup question, Jeremy. The consensus provision for 2024 is 10.7 billion. Could you maybe clarif for once and for all, sort of Jamie's comments at an industry conference earlier and you know, try to sort of triangulate if that 10.7 billion provision is appropriate for the growth level that you are planning for in card. Yeah, happy to clarify that. So Jamie's comments were that the allowance, the build and the card allowance, we're talking about card specifically, we expected something like 2 billion for the full year. As I said here today, our expectation for that number is actually slightly higher, but, you know, it's in the ballpark. And I think in terms of what that means for the consensus on the overall allowance change for the year, you know, last time I checked it still looked a little low on that front, so who knows what it'll actually wind up being. But that remains our view. One question that we've gotten is how to reconcile that build to the 12% growth in OS that we've talked about, because it seems like a little bit high relative to what you would have otherwise assumed if you apply some sort of a standard coverage ratio to that growth. But the reason that's the Case is essentially a combination of higher revolving mix as we continue to see some normalization revolve in that 12% as well as seasoning of earlier vintages which comes with slightly higher allowance per unit of OS growth. Great, thank you. Thanks Erica. And for our final question we'll go to the line of Jim Mitchell from Seaport Global Securities. Please go ahead. Hey, good morning. Maybe just one last question on sort of deploying excess capital. Seems like the two primary ways to do that organically would be through the trading book or the loan book. So maybe two questions there. One, trading assets were up 20% year over year. Is that you leaning into it or just a function of demand and is there further opportunities to grow that? And then secondly, outside of cards, loan demand has been quite weak. And any thoughts from you on if you're seeing any change in demand or how you're thinking about loan demand going forward? Thanks. Thanks Jim. Good question. So yeah, trading assets have been up. That is basically client activity, primarily secure financing related sort of match book repo type stuff and similar things that are gross up the balance sheet quite a bit but are quite low risk and therefore quite low RWA intensity. So while our ability to supply that financing to clients is something that we're happy about and it very much represents us leaning into the franchise to serve our clients, it's not really particularly RWA and therefore capital intensive and therefore it doesn't really reflect an aggressive choice on our part to deploy capital, so to speak, on the loan demand front. Yeah, I mean, unfortunately I just don't have much new to say there on loan demand. Meaning to your point, loan demand remains quite muted everywhere except card. Our card business is of course, course in no way capital constrained. So whatever growth makes sense there in terms of our customer franchise and our ability to acquire accounts and retain accounts and what fits inside our credit risk appetite is growth that's going to make sense. And so we're very happy to deploy capital to that, but it's not constrained by our willingness or ability to deploy capital to that. And of course, you know, for the rest of the loan space, the last thing that we're going to do is have the excess capital mean that we lean in to, you know, lending that is not inside our risk appetite or inside our credit box. You know, especially in a world where spreads are quite compressed and terms are under pressure. So there's always a balance between capital deployment and, you know, assessing economic risk rationally. And frankly that is in some sense a microcosm of the larger challenge that we have right now. You know, when I talked about if there was ever a moment where the opportunity cost of not deploying the capital relative to how attractive the opportunities outside the walls of the company are, now would be it. In terms of being patient, that's a little bit one example of what I was referring to. Right. Okay, great. Thanks. Thanks, Jim. And we have no further questions. Very good. Thank you, everyone. See you next quarter. Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.",
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          "text": "Good morning ladies and gentlemen. Welcome to JPMorgan Chase's second quarter 2024 earnings call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website and please refer to the disclaimer in the back concerning forward looking statements. Please stand by. At this time I would like to turn the call over to JPMorgan Chase's Chief Financial Officer Jeremy Barnum. And Mr. Barnum, please go ahead. 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 $4.4 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 markets 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 give 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 component. 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 incorporate whereas now they are primarily in the relevant line of business. Now Turning to page two for the firmwide 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%. NIIX 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 wholesale onto balance sheet and capital. On page three we ended the quarter with a CT1 ratio of 15.3%, up 30 basis points versus the prior quarter, primarily driven by net income low, 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 four. CCB reported net income of 4.2 billion on 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 in 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. 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 on higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolving fall 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 of $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 five 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. IV fees were up 50% year on year and we ranked number one with year to date wallet share of 9.5% in advisory fees were up 45%, primarily driven by the closing of a few large deals in a weak 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 cost 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 and 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 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 income. 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 eight. Our 2024 guidance including the drivers remains unchanged. From what we said at Investor Day, we continue to expect NII and NII X markets approximately 91 billion, adjusted expense of about 92 billion and on credit card net charge off rate of approximately 3.4% 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 and A. Please stand by. For our first question we'll go to the line of Stephen Chewbacc from Wolff Research. Please go ahead. Hi, good morning, Jeremy. 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 3 endgame and the G SIB surcharge calculations, which I know you've been pushing for for some time as you evaluate just different capital scenarios, are these revisions material enough where they could support a higher normalized ROTC at the firm versus a 17% target? And if so, just how that might impact or inform your appetite for buybacks going forward. Right. Okay now thanks Steve. And actually, before answering the question, I just want to remind everyone that Jamie is not able to join because he has a travel conflict overseas. So it's just going to be me today. Okay, good question on the capital and the rotc. So let me start with the ROTC point first. In short, my answer to that question would be no. It's hard to imagine a scenario coming out of the whole potential range of outcomes on capital that involves an upward revision on Rob C. If you think about the way we've been talking about this, we've said that before the Basel III endgame proposal we had a 17% cycle target and that while you can imagine a range of different outcomes, the vast majority of them involve expansions of the denominator. And while we had ideas about changing the perimeter and repricing, all of which are still sort of in effect, most of those would be thought of as mitigants rather than things that would actually increase the rotc. And I don't really think that answer has particularly changed. So as of now, that's what I would say, which is a good pivot to the next point, which is yeah, we've been reading the same press coverage you've been reading and it's fun and Interesting to speculate about the potential outcomes here, but in reality, we don't know anything. You don't know. We don't know how reliable the press coverage is. And so in that sense, I feel like on the overall capital return and buyback trajectory, not much has actually changed relative to what I laid out at Investor Day. The comments that I made then, the comments that Jamie made then, as well as the comments that Jamie made subsequent week at an industry conference. So maybe I'll just briefly summarize for everyone's benefit what we think that is, which is one, we do recognize that our current practice on capital return and buybacks does lead to an ever expanding CET1 ratio. But obviously we're going to run the company over the cycle, over time at a reasonable CET1 ratio with reasonable buffers relative to our requirements. So after all the uncertainty is sorted out, the question of the deployment of the capital one way or another is a matter of when, not if. On the capital hierarchy, it's also worth noting that's another thing that remains unchanged. So review it quickly. You know, growing the business organically and inorganically, sustainable dividend. And in that context, it's worth noting that the board's announced intention to Increase it to $1.25 is a 19% increase prior to last year. So that's a testament to our performance, and that is a return of capital and then finally buyback. But that hierarchy does not commit US to return 100% of the capital generation in any given quarter. And so, you know, as we sit here today, when you look at the relationship between the opportunity cost of not deploying the capital and the opportunities to deploy the capital outside the firm, it's kind of hard to imagine an environment where that relationship argues more strongly for patients. So given all that, putting it all together, I'm sorry for the long answer. We remain comfortable with the current amount of excess capital, and as Jamie has said, we really continue to think about it as earnings in store as much as anything else. No need to apologize, Jeremy. That was a really helpful perspective. Maybe just for my follow up on nii, you've been very consistent just in flagging the risks related to NII over earning, especially in light of potential deposit attrition as well as repricing headwinds in the second quarter, we did see at least some moderation in repricing pressures. Deposit balances were also more resilient in what's a seasonally weak quarter for deposit growth. So just given the evidence that some deposit pressures appear to be abating, do you see the potential for NII normalizing higher? And where do you think that level could ultimately be in terms of stabilization? Yeah, interesting question, Steve. So let's talk about deposit balances. So yeah, I see your point about how balance pressures are slightly abating when you look at the system as a whole, just to go through it, QT is still a bit of a headwind. Loan growth is modest and not enough to offset that. And RRP seems to have settled in roughly at its current levels and there are reasons to believe that it might not go down that much more, although that could always change and that could supply extra reserves into the system. But on balance net across all those various effects, we still think that there are net headwinds to deposit balances. So when we think of our balance outlook, we see it as flat to slightly down, maybe with our market share and growth ambitions offsetting those system wide headwinds. So in terms of normalizing higher, I guess it depends on relative to what, but I think it's definitely too early to be sort of calling the end of the over earning narrative or the normalization narrative. Clearly the main difference in our current guidance relative to what we had earlier in the year, which implied a lot more sequential decline, is just the change in the Fed outlook. So two cuts versus six cuts is the main difference there. But obviously based on the latest inflation data and so on, you could easily get back to a situation with a lot more cuts in the yield curve. So we'll see how it goes. And in the end we're kind of focused on just running the place, recognizing and trying not to be distracted by what remains some, some amount of over earning, whatever it is. Understood. Jeremy, thanks so much for taking my questions. Thanks, Steve. Next we'll go to the line of Saul Martinez from hsbc. Please go ahead. Hi, good morning. Thanks for taking my question. Jeremy, can you give an update on the stressed capital buffer? You noted obviously that you think there is an error in the Fed's calculation due to oci? Can you just give us a sense of what the dialogue with the Fed looks like? Is there a process to modify the ECB higher and if you can give us a sense of what that process looks like. Yeah, so I'm not going to comment about any conversations with the Fed, you know, not to confirm or deny that they even exist. You know that stuff is private and you know, so. And then if you, if you talk about like the timing here. Right. So you know that the stress capital buffer that's been released at 3.3% is a preliminary number. By rule, the Fed has to Release that by August 31st. It may come sooner. You know, you talked about an error in the calculation. We haven't used that word. You know, what we know, what we believe rather is that the amount of OCI gain that came through the Fed's disclosed results looked non intuitively high to us. And you know, if you adjust that in ways that we, we think are reasonable, you know, you would get a slightly higher stress capital buffer. Whether the Fed agrees and whether they decide to make that change or not is up to them and you know, know, we'll see what happens. I think the larger point is that if you look at the industry as a whole and if you sort of put us into that with some higher pro forma scb, whatever it might conceivably be, you actually see once again quite a bit of volatility in the year on year change in the stressed capital buffer for many firms. And just sort of reiterating. And another example of what we've said a lot over the years, that it's volatile, it's untransparent, it makes it very hard to manage capital of a bank, it leads to excessively high management buffers. And we think it's really not a great way to do things. So I'll leave it at that. Okay, got it. That's helpful. Just following up on capital returns. On Steve's question, I think you highlighted in response it's a matter of when, not if. And obviously Jamie's not there. He can't speak for Jamie, but seems to have shown limited enthusiasm for a special dividend or buybacks at current valuations. Can you just give us a sense of how you're thinking about the various options? Any updated thoughts on a special dividend? And can you do other things like for example, have a material increase in your dividend payout, sort of a step function increase where, you know, keep that flat and grow into that, grow your earnings into that over time. Can you just maybe give us a sense of how you're thinking about what, you know, what options you have available to deploy that, you know that capital? Sure, yeah. I mean I would direct you to read, I'm sure you have Jamie's comments at the industry conference where he participated the week after Investor Day, because he went into a good amount of detail on this stuff addressing some of these points. And I think his comment there about the special dividend was that it's not really our preference. We hear from people that many of our Investors wouldn't find that particularly appealing. And he said as much that it wouldn't be sort of our first choice. So I think the larger point is just that a little bit to your question, there are a number of tools in the toolkit and they're really the same tools that are part of our capital hierarchy. So first and foremost, we're looking to deploy the capital into organic or inorganic growth. And then the dividend. I think we're always going to want to keep it in that sort of like sustainable and also sustainable in a stressed environment. So that continues to be the way we think about that. And then at the end of it, it's buybacks. And Jamie's been on the record for over a decade, I think over many shareholder letters, talking about how he thinks about price and buybacks and valuation and price is a factor that's sort of the totality of the set of options, I guess. Okay, great. Thanks a lot. Thanks. All. Next we'll go to the line of Ken Uzdin from Jefferies. Please go ahead. Thanks a lot. Good morning, Jeremy. Jeremy, great to see the progress on investment banking fees up sequentially and 50% year over year. And I saw you on the tape earlier just talking about still regulatory concerns a little bit in the advisory space. And we clearly didn't see the debt pull forward play through because your DCM was great. Again, I'm just wondering just where you feel the environment is relative to the potential and just where the dialogue is across the three main bucket areas in terms of how does this feel in terms of a current environment versus a potential environment that we could still see ahead. Thanks. Yeah, thanks, Ken. It's progress, right? I mean, we're happy to see the progress. You know, people have been talking about the depressed banking fee wallet for some time and it's nice to see not only that you're on your pop from a low base, but also a nice sequential improvement. So that's the first thing to say in terms of dialogue and engagement. It's definitely elevated. So, you know, the dialogue on ECM is elevated and the dialogue on M and A is quite robust as well. So all of those are good things that encourage us and make us hopeful that we could be seeing sort of a better trend in this space. But there are some important caveats. So on the DCM side, yeah, we made pull forward comments in the first quarter, but we still feel that this second quarter still reflects a bunch of pull forward and therefore we're reasonably cautious about the second half of the year. Importantly, a Lot of the activity is refinancing activity as opposed to for example acquisition finance. So the fact that M and A remains still relatively muted in terms of actual deals has knock on effects on DCM as well. And when a higher percentage of the wallet is refi, then the pull forward risk becomes a little bit higher on ecm. If you look at it kind of at a remove, you might ask the question, given the performance of the overall indices, you would think it would be a really booming environment for IPOs, for example. And while it's improving, it's not quite as good as you would otherwise expect. And that's driven by a variety of factors including the fact that as has been widely discussed, the extent to which the performance of the large industries is driven by like used stocks, the sort of mid cap tech growth space and other spaces that would typically be driving IPOs have had much more muted performance. Also a lot of the private capital that was raised a couple years ago was raised at pretty high valuations. And so in some cases people looking at IPOs could be looking at down rounds. That's an issue. And while secondary market performance of IPOs has improved meaningfully in some cases people still have concerns about that. So those are a little bit of overhang on that space. I think we can hope that over time that fades away and the trend gets a bit more robust. And yeah, on the advisory side the regulatory overhang is there, remains there and so we'll just have to see how that plays out. Great, thank you for all that Jeremy. And just one, on the consumer side, just anything you're noticing in terms of people just have been waiting for this delinquency stabilization. On the credit card side, obviously your loss rates are coming in as you expected and we did see 30 days pretty flat and 90 days come down a little bit. Is that seasonal? Is it just a good rate of change trend? Any thoughts there? Thanks. Yeah, I still feel like when it comes to card charge offs and delinquencies, there's just not much to see there. It's still, it's normalization, not deterioration. It's in line with expectations. You know, as I say, we always look quite closely inside the cohorts, inside the income cohorts. And you know, when you look in there specifically for example on spend patterns, you can see a little bit of evidence of behavior that's consistent with a little bit of weakness in the lower income segments where you see a little bit of rotation of the spend out of discretionary into non discretionary. But the effects are really quite subtle and in my mind definitely entirely consistent with the type of economic environment that we're seeing, which while very strong and certainly a lot stronger than anyone would have thought given the tightness of monetary conditions, say like they've been predicting it a couple years ago or whatever, you know, you are seeing slightly higher unemployment, you are seeing moderating GDP growth. And so it's not entirely surprising that you're seeing a tiny bit of weakness in some pockets of spend. So it all kind of hangs together in what is in some sense actually not a very interesting story. Thank you. Thanks, Ken. Next we'll go to the line of Glenn Shore from Evercore isi. Please go ahead. Hi, thanks very much. So Jeremy, the discussion so far around private credit and you all your recent comments have been the ability to add on balance sheet and compete when you need to compete on the credit creditfront. And I do think that most of that discussion has been about the direct lending component. So I'm curious if you're showing more progress and activity on that front and then very importantly, do you see the same trend happening on the asset backed finance side? Because that's a bigger part of the world and it's a bigger part of your business. So I'd appreciate your thoughts there. Thanks. Yeah. Thanks, Glenn. So on private credit, so nothing really new to say there. I think. I guess one way the environment's evolving a little bit is that as you know, a lot of money has been raised in private credit funds looking for deals. And sort of a little bit to my prior comments, in a relatively muted acquisition finance environment, you know, at this point you've got a lot of money chasing like not that many deals. So the space is a little bit quieter than it was at the margin. Another interesting thing to note is some of this discussion about kind of lender protections that were typical in the syndicated lever finance market making their way into the private market as well as sort of people realize that even in the private market you probably need some of those protections in some cases, which is sort of supportive of the theme that we've been talking about, about convergence between the direct lending space and the syndicated lending space, which is kind of our core thesis here, which is that we can offer best in class service across the entire continuum, including secondary market trading and so on. So we feel optimistic about our offering there. I think the current environment is maybe a little bit quieter than it was. So it's maybe not a great moment to kind of test whether we're doing a lot more or less in this Space, so to speak. And then on asset backed financing, you actually asked me that question before and at the time my answer was that I hadn't heard much about that trend. And that continues to be the case. But clearly there must be something I'm missing. So I can follow up on that and maybe we can have a chat about it. No, it's great for you if you're not hearing much about it, so we could leave it at that. Maybe just one quick follow up in terms of your just overall posturing. You were patient and smart when rates were low, waited to deploy, worked out great. We know that story now. It seems like you have tons of excess liquidity and you're being patient and rates are high. And I'm curious on how you think about what kind of triggers, what kind of things you're looking for in the market to know if and when you would extend duration. Right. I mean, on duration, you know, in truth, we have actually added a little bit of duration over the last couple quarters. So, you know, that's one thing to say that was more last quarter than this quarter. But I guess I would just caution you from a little bit away from looking at kind of our reported cash balances and our balance sheet and concluding that, you know, when you look at the duration concept holistically, that there is a lot to be done differently on the duration fund. So clearly it's true that empirically we've behaved very asset sensitively in this rate hiking cycle and that has resulted in a lot of excess NAI generation on the way up in the near term. But when we look at the firm's overall sensitivity to rates, we look at it through both the ear type lens, the short term NI sensitivity, but also a variety of other lenses, including various types of scenario analysis, including impacts on capital from higher rates. As I think Jamie has said a couple times, we actually aim to be relatively balanced on that front. Also, given like the inverted yield curve, it's not as if extending duration from these levels means that you're locking in 5.5% rates. In fact, the forwards are not that compelling given our views about some sort of structural upward pressures on inflation and so on. So I think when you put that all together, I don't think that kind of a big change in duration posture is a thing that's front of mind for us. Super helpful. Thanks so much for that. Thanks, Glenn. Next we'll go to the line of Matt O'Connor from Deutsche Bank. Please go ahead. Good morning. I was just wondering if you can elaborate on Essentially the math behind the Roxy being too high at 20 and more normalized at 17. Obviously you pointed to over earning on NetII and I guess the question is, is that all of it to go from 20 to 17 and if so, is that all consumer deposit costs or are there a few other components that you could help frame trust? Sure, good question, Matt. I mean, I guess the way I think about it is a couple things like, you know, our returns tend to be a bit seasonal, right? So if you kind of build yourself out a full year forecast and make reasonable just based on your own or analyst consensus, whatever, and you think about fourth quarter, like better to look at this on a full year basis when you think about the returns and the quarterly numbers and you actually have to strip out kind of the one time items. So if you do that, like whatever you get for this year is still clearly a number that's higher than the 17%. So yeah, one source of headwinds is normalization of. One source of headwinds is normalization of the NII primarily as a result of expected higher deposit costs. That's, you know, we've talked about that part of it is also the yield curve effects. Some cut will come into the curve at some point. And you know, in the normal course if you kind of do a very, very, very simple mental model of the company, you would have like expenses growing, revenues growing at some organic GDP like rate maybe higher and expenses growing at a similar slightly lower rate, producing a sort of relatively stable overhead ratio. But even if the amount of NII normalization winds up being less than we might have thought at some prior point, you still have some background, you know, you still have some normalization of the overhead ratio that needs to happen. So as much as you know, our discipline on expense management is, you know, as tight as it always has been, there inflation is still non zero, there are still investments that we're executing. There's still higher expense to come in a slightly flatter revenue environment as a result of in part the normalization of nii. And then the final point is that whatever winds up being the answer on Basel III Endgame and all the other pieces, you have to assume some amount of expansion of the denominator, at least based on what we know so far. So of course any of those pieces could be wrong, but that's kind of how we get to our 17%. And if you look at the various scenarios that we showed on the last page of my Investor Day presentation, it illustrates those dynamics and also how much the range could actually Vary as a function of the economic environment and other factors. Yes, that was a really helpful chart. Just one follow up on the yield curve effects, I guess. What do you mean by that? Because right now the yield curve is inverted. Maybe you're still believing in the impact of that, but kind of longer term you'd expect a little bit of steepness of the curve, which I would think would help. But what did you mean by that? Thank you. Yeah, I mean you and I have talked about this before. I guess I sort of, I guess I don't really agree fundamentally with the notion that the way to think about things is that sort of yield curve steepness above and beyond what's priced in by the forwards is a source of structural NII or NEM for banks, if you know what I mean. I mean people have different views about the so called term premium. And obviously in a moment of inverted curve and different types of treasury supply dynamics, people's thinking on that may be changing. But I think we saw when rates were at zero and the 10 year note was below 2%, everyone sort of, many people were kind of tempted to try to get extra NIM and extra NII by extending duration a lot. But when the steepness of the curve implies is driven by the expectation of actually aggressive Fed tightening, it's just a timing issue and you can wind up kind of pretty offsides from the capital and other perspectives. So there are some interesting questions about whether fiscal dynamics might result in a structurally steeper yield curve down the road and whether that could be sort of earning. The term premium, so to speak could be a source of nii, but that feels a bit speculative to me at this point. Got it. Okay, thank you for the details. Thanks, Matt. Next we'll go to the line of Mike Mayo from Wells Fargo Securities. Please go ahead. Hi Jeremy. You said it's too early to end the over earning narrative and you highlighted higher deposit costs and the impact of lower rates and lower NII and DCM pull forward and credit costs going higher. Anything I'm missing in that list and what would cause you to end the over earning narrative? No, actually I think that is the right list, Mike. I mean, frankly, I think one thing that would end the over earning narrative is if our annual returns were closer to 17%. I mean to the extent that that is through the cycle number that we believe and that we're currently producing more than that, that's one very simple way to look at that. But the pieces of that are the pieces that you talked about and the single most important piece is the deposit margin. Our deposit margins are well above historical norms and that is a big part of the reason that we still are emphasizing the over earning. You're 17% through the cycle roti an expectation. What is the CET1 ratio that you assume for that? I mean, we would generally assume requirements plus a reasonable buffer which depending on the shape of rules, could be a little bit smaller, a little bit bigger, in no small part as a function of the volatility of those rules, which goes back to my prior comments on SCB and ccar. But obviously, as you well know, what actually matters is less the ratio and more the dollars. And at this point, the dollars are very much a function of where rules land and where the RWA lands and you know, and obviously things like G SIB recalibration and so on. So we've done, you know, a bunch of scenario analysis along the lines of what I did in Investor Day that informs those numbers. But that is obviously one big element of uncertainty behind that 17%. Which is why at Investor Day, when we talked about it, both Daniel and I were quite specific about saying that we thought 17% was still achievable, assuming a reasonable outcome on the Basel III end game. Let me just zoom out for one more question on the return target. I mean, when I asked Jamie at the 2013 Investor Day, you know, would it make Sense to have 13.5% capital? He was basically telling me to take a hike. Right. And now you have 15.3% capital and you're saying, well, we might want to have a lot more capital here. I mean, at some point, if you're spending $17 billion a year to improve the company, if you're gaining share with digital banking, if you're automating the back office, if you're moving ahead with AI, you're doing all these things that I think you say others aren't doing. Why wouldn't those returns go higher over time? Or do you just assume you'll be competing those benefits away? Thanks. Yeah. I mean, I think, in short, Mike, you know, we've talked about this a lot and Jamie's talked about this a lot. It's a very, very, very competitive market, you know, and we're very happy with our performance, we're very happy with the share we've taken. And 17% is like an amazing number actually. And to be able to do that, given how robust the competition is from banks, from non banks, from US banks, from foreign banks and all the different businesses that we compete in, is something that we're really proud of. So the number has a range around it, obviously. So it's not a promise, it's not a guarantee, and it can fluctuate. But we're very proud to be in the ballpark of being able to think that we can deliver it again, assuming the reasonable outcome on the puzzle through the end game. But it's a very, very, very competitive market across all of our products and services and regions and client segments. All right, thank you. Next we'll go to the line of Betsy Grasik from Morgan Stanley. Please go ahead. Hi, Jeremy. Hi, Jeremy. So I did want to ask one drill down question on 2Q, and it's related to the dollar amount of buybacks that you did do. I think in the press release right in the slide deck, it's 4.9 billion common stock net repurchases. So the question here is, what's the governor for you on how much to do every quarter? I understand it's a function of, okay, how much do we organically grow? But even with that, so you get the organic growth, which you had some nice movement there, but you do the organic growth and then is it how much do we earn and we want to buy back our earnings or how should we be thinking about what that repurchase volume should be looking like over time? I remember at Investor Day the whole debate around I don't want to buy back my stock, but we are. I get this question from investors quite a bit of how should we be thinking about how you think about what the right amount is to be doing here? Yeah, that's a very good and fair question, Betsy. So let me try to unpack it to the best of my ability. So in no particular order, one thing that we've really tried to emphasize in a number of different settings, including in our recent 10 Qs actually, is that we don't want to get into the business of guiding on buybacks. So we're going to buy back whatever we think makes sense in the current moment, sort of, and we preserve the right to sort of change that at any time. So I recognize that not everyone loves that, but that is kind of a philosophical belief and so I might as well say it explicitly. It was pretty clear in the queue also, but I'm just going to say that again. So that's point one. But having said that, let me nonetheless try to address your point on framework and governors. So generally speaking, we think it doesn't make sense to sort of exit the market entirely unless the conditions are much more unusual than they are right now, let's say obviously when, for whatever reason, if we ever need to build capital in a hurry, we've done it before and we're always comfortable suspending buybacks entirely. But I think some modest amount of buybacks is a reasonable thing to do when you're generating your kind of capital. And so we were talking before about this 2 billion pace. We kind of trying to move away from this notion of a pace, but that's where that idea comes from, let's put it that way. You talked about the 4.9, which I recognize may seem like a little bit of a random number, but where that actually comes from is the other statement that we made that we have these significant item gains from Visa. And if you think about what that means, it means that we have post the acceptance of the exchange offer a meaningful long position and a liquid large cap financial stock that is Visa, which realistically is highly correlated to our own stock. And so in some sense why carry that instead of just buying back JP Morgan stock? So we talked about, Jamie talked about as we liquidate the Visa, deploying those proceeds into jpm and that's what we did this quarter. So that is why the 4.9 is a little higher. And it's consistent with my comments at Investor Day around having slightly increased the amount of buybacks. And beyond that, what you're left with is my answer to Steve's question, which is that to your point about buying back earnings or whatever, when we're generating these types of earnings and there's this much organic capital being generated in the absence of opportunities to deploy it organically or inorganically and while continuing to maintain our healthy but sustainable dividend, if we don't return the capital, we are going to Keep growing the CT1 ratio to levels which if you think about the long strategic outlook of the company, are not reasonable. They're just artificially high and unnecessary. So one way or the other that will need to be addressed at some point. It's just that we don't feel that now is the right time. All right, thank you, Jeremy, appreciate it. Thanks, Betsy. Next we'll go to the line of Gerard Cassidy from RBC Capital Markets. Please go ahead. Hi Jeremy, how are you? Hi, Gerard. Jeremy, can you. I know you touched on deposits earlier in the call in response to a question I noticed on the average balances the non interest bearing deposits were relatively stable quarter to quarter versus prior quarters when they have steadily declined. And this is one of the areas of course, investors are focused on in terms of the future of the net interest margin for you and your peers. Can you elaborate if you can, what you're seeing in that non interest bearing deposit account? I know this is average and not period and the period end number may actually be lower, but what are you guys seeing here? Yeah, good question, Gerard. I have to be honest, I hadn't focused on that particular sequential explain that is quarter on quarter change and average non interest bearing deposits. But I think the more important question is the big picture question, which is what do we expect? How are we thinking about ongoing migration of non interest bearing into interest bearing in the current environment and how that affects our RNI outlook and our expectation for weighted average rate paid on deposits? And the answer to that question is that we do continue to expect that migration to happen. So if you think about it, you know, in the wholesale space, you know, you have a bunch of clients with some balances in non interest bearing accounts and over time, for a variety of reasons we do see them moving those balances into interest bearing. So we do continue to expect that migration to happen and therefore that will be a source of headwinds. And you know that migration sometimes happens internally, that is out of non interest bearing into interest bearing or into CDs, sometimes it goes into money markets or into investments which is what we see happening in our wealth management business. And you know, some of it does leave the company. But one of the things that we're encouraged by is the extent to which we are actually capturing a large portion of that yield seeking flow through CDs and money market offerings, et cetera, across our various franchises. So big picture, I do think that migration out of non interest bearing into interest bearing will continue to be a thing and that is a contributor to the modest headwinds that we expect for NII right now. But yeah, I'll leave it at that I guess. Very good. And as a follow up, you've been very clear about the consumer credit card charge offs and delinquency levels. And we all know about the commercial real estate office and you always talk about over earning on net interest income. Of course one of the great credit quality stories for everyone, including yourselves, is the C and I portfolio. How strong it's been in this elevated rate environment. I know your numbers are still quite low, but there in the corporate investment bank you had about a $500 million pickup in non accrual loans. Can you share with us what are you seeing in cni? Are there any early signs of cracks or anything? And again, I know your numbers are still good, but I'M just trying to look forward to see if there's something here over the next 12 months or so. Yeah, it's a good question. I think the short answer is no, we're not really seeing early signs of cracks in cni. I mean, yes, I agree with you. Like the CNI charge off rate has been very, very low for a long time. I think we emphasized that at last year's Investor Day, if I remember correctly. I think the CNI charge off rate over the preceding 10 years was something like literally zero. So that is clearly very low by historical standards. And while we take a lot of pride in that number, and I think it reflects the discipline and our underwriting process and the strength of our, of our credit culture across bankers and the risk team, we don't actually run that franchise to like a zero loss expectation. So you have to assume there'll be some upward pressure on that. But, you know, in any given quarter, the CNI numbers tend to be quite lumpy and quite idiosyncratic. So I don't think that anything in the current quarter results is indicative of anything broader. And I haven't heard anyone internally talk that way. I would say great. Appreciate the insights as always. Thank you. Thanks, Gerard. Next we'll go to the line of Erika Najarian from ubs. Please go ahead. Hi, good morning. I just had one cleanup question, Jeremy. The consensus provision for 2024 is 10.7 billion. Could you maybe clarif for once and for all, sort of Jamie's comments at an industry conference earlier and you know, try to sort of triangulate if that 10.7 billion provision is appropriate for the growth level that you are planning for in card. Yeah, happy to clarify that. So Jamie's comments were that the allowance, the build and the card allowance, we're talking about card specifically, we expected something like 2 billion for the full year. As I said here today, our expectation for that number is actually slightly higher, but, you know, it's in the ballpark. And I think in terms of what that means for the consensus on the overall allowance change for the year, you know, last time I checked it still looked a little low on that front, so who knows what it'll actually wind up being? But that remains our view. One question that we've gotten is how to reconcile that build to the 12% growth in OS that we've talked about, because it seems like a little bit high relative to what you would have otherwise assumed if you apply some sort of a standard coverage ratio to that growth. But the reason that's the case is essentially a combination of higher revolving mix as we continue to see some normalization revolve in that 12% as well as seasoning of earlier vintages which comes with slightly higher allowance per unit of OS growth. Great, thank you. Thanks Erica. And for our final question we'll go to the line of Jim Mitchell from Seaport Global Securities. Please go ahead. Hey, good morning. Maybe just one last question on sort of deploying excess capital. Seems like the two primary ways to do that organically would be through the trading book or the loan book. So maybe two questions there. One, trading assets were up 20% year over year. Is that you leaning into it or just a function of demand and is there further opportunities to grow that? And then secondly, outside of cards, loan demand has been quite weak and any thoughts from you on if you're seeing any change in demand or how you're thinking about loan demand going forward? Thanks. Thanks Jim. Good question. So yeah, trading assets have been up. That is basically client activity, primarily secure financing related sort of match book repo type stuff and similar things that are gross up the balance sheet quite a bit but are quite low risk and therefore quite low RWA intensity. So while our ability to supply that financing to clients is something that we're happy about and it very much represents us leaning into the franchise to serve our clients, it's not really particularly RWA and therefore capital intensive and therefore it doesn't really reflect an aggressive choice on our part to deploy capital, so to speak on the loan demand front. Yeah, I mean unfortunately I just don't have much new to say there on loan demand. Meaning to your point, loan demand remains quite muted everywhere except card. Our card business is of course, course in no way capital constrained. So whatever growth makes sense there in terms of our customer franchise and our ability to acquire accounts and retain accounts and what fits inside our credit risk appetite is growth that's going to make sense. And so we're very happy to deploy capital to that, but it's not constrained by our willingness or ability to deploy capital to that. And of course, you know, for the rest of the loan space, the last thing that we're going to do is have the excess capital mean that we lean in to, you know, lending that is not inside our risk appetite or inside our credit box. You know, especially in a world where spreads are quite compressed and terms are under pressure. So there's always a balance between capital deployment and you know, assessing economic risk rationally. And frankly that is in some sense a microcosm of the larger challenge that we have right now. You know, when I talked about if there was ever a moment where the opportunity cost of not deploying the capital relative to how attractive the opportunities outside the walls of the company are, now would be it. In terms of being patient, that's a little bit one example of what I was referring to. Right. Okay, great. Thanks. Thanks, Jim. And we have no further questions. Very good. Thank you, everyone. See you next quarter. Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.",
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          "text": "Good morning ladies and gentlemen. Welcome to JPMorgan Chase's second quarter 2024 earnings call. This call is being recorded. Your line will be muted for the duration of the call. We will now go live to the presentation. The presentation is available on JPMorgan Chase's website and please refer to the disclaimer in the back concerning forward looking statements. Please stand by. At this time I would like to turn the call over to JPMorgan Chase's Chief Financial Officer Jeremy Barnum. And Mr. Barnum, please go ahead. 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 $4.4 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 markets 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 give 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 component. 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 incorporate whereas now they are primarily in the relevant line of business. Now Turning to page two for the firmwide 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%. NIIX 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 wholesale onto balance sheet and capital. On page three we ended the quarter with a CT1 ratio of 15.3%, up 30 basis points versus the prior quarter, primarily driven by net income low, 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 four. CCB reported net income of 4.2 billion on 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 in 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. 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 on higher revolving balances. Card outstandings were up 12% due to strong account acquisition and the continued normalization of revolving fall 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 of $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 five 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. IV fees were up 50% year on year and we ranked number one with year to date wallet share of 9.5% in advisory fees were up 45%, primarily driven by the closing of a few large deals in a weak 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 cost 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 and 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 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 income. 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 eight. Our 2024 guidance, including the drivers remains unchanged from what we said at Investor Day. We continue to expect NII and NII X markets approximately 91 billion, adjusted expense of about 92 billion and on credit card net charge off rate of approximately 3.4% 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 and A. Please stand by. For our first question we'll go to the line of Stephen Chewbacc from Wolff Research. Please go ahead. Hi, good morning, Jeremy. 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 3 endgame and the G SIB surcharge calculations, which I know you've been pushing for for some time as you evaluate just different capital scenarios, are these revisions material enough where they could support a higher normalized ROTC at the firm versus a 17% target? And if so, just how that might impact or inform your appetite for buybacks going forward. Right. Okay now thanks Steve. And actually, before answering the question, I just want to remind everyone that Jamie is not able to join because he has a travel conflict overseas. So it's just going to be me today. Okay, good question on the capital and the rotc. So let me start with the ROTC point first. In short, my answer to that question would be no. It's hard to imagine a scenario coming out of the whole potential range of outcomes on capital that involves an upward revision. On Rob C. If you think about the way we've been talking about this, we've said that before the Basel III endgame proposal we had a 17% cycle target and that while you can imagine a range of different outcomes, the vast majority of them involve expansions of the denominator. And while we had ideas about changing the perimeter and repricing, all of which are still sort of in effect, you know, most of those would be thought of as mitigants rather than things that would actually like increase the rotc. And I don't really think that answer has particularly changed. So as of now, that's what I would say, which is a good pivot to the next point, which is, yeah, we've been reading the same press coverage you've been reading and it's fun and interesting to speculate about the potential outcomes here, but in reality, we don't know anything. You don't know. We don't know how reliable the press coverage is. And so in that sense, I feel like on the overall capital return and buyback trajectory, not much has actually changed relative to what I laid out at Investor Day. The comments that I made then, the comments that Jamie made then, as well as the comments that Jamie made subsequent week at an industry conference. So maybe I'll just briefly summarize for everyone's benefit what we think that is, which is one, we do recognize that our current practice on capital return and buybacks does lead to an ever expanding CET1 ratio. But obviously we're going to run the company over the cycle, over time, at a reasonable CET1 ratio with reasonable buffers relative to our requirements. So after all the uncertainty is sorted out, the question of the deployment of the capital one way or another is a matter of when, not if. On the capital hierarchy, it's also worth noting that's another thing that remains unchanged. So review it quickly. You know, growing the business organically and inorganically, sustainable dividend. And in that context, it's worth noting that the board's announced intention to Increase it to $1.25 is a 19% increase prior to last year. So that's a testament to our performance, and that is a return of capital and then finally buyback. But that hierarchy does not commit US to return 100% of the capital generation in any given quarter. And so, you know, as we sit here today, when you look at the relationship between the opportunity cost of not deploying the capital and the opportunities to deploy the capital outside the firm, it's kind of hard to imagine an environment where that relationship argues more strongly for patients. So given all that, putting it all together, I'm sorry for the long answer. We remain comfortable with the current amount of excess capital, and as Jamie has said, we really continue to think about it as earnings in store as much as anything else. No need to apologize, Jeremy. That was a really helpful perspective. Maybe just for my follow up on nii, you've been very consistent just in flagging the risks related to NII over earning, especially in light of potential deposit attrition as well as repricing headwinds in the second quarter, we did see at least some moderation in repricing pressures. Deposit balances were also more resilient in what's a seasonally weak quarter for deposit growth. So just given the evidence that some deposit pressures appear to be abating, do you see the potential for NII normalizing higher? And where do you think that level could ultimately be in terms of stabilization? Yeah, interesting question, Steve. So let's talk about deposit balances. So yeah, I see your point about how balance pressures are slightly abating when you look at the system as a whole. Just to go through it, QT is still a bit of a headwind. Loan growth is modest and not enough to offset that. And RRP seems to have settled in roughly at its current levels and there are reasons to believe that it might not go down that much more, although that could always change and that could supply extra reserves into the system. But on balance net across all those various effects, we still think that there are net headwinds to deposit balances. So when we think of our balance outlook, we see it as flat to slightly down, maybe with our market share and growth ambitions offsetting those system wide headwinds. So in terms of normalizing higher, I guess it depends on relative to what, but I think it's definitely too early to be sort of calling the end of the over earning narrative or the normalization narrative. Clearly the main difference in our current guidance relative to what we had earlier in the year, which implied a lot more sequential decline, is just the change in the Fed outlook. So two cuts versus six cuts is the main difference there. But obviously based on the latest inflation data and so on, you could easily get back to a situation with a lot more cuts in the yield curve. So we'll see how it goes. And in the end we're kind of focused on just running the place, recognizing and trying not to be distracted by what remains some, some amount of over earning, whatever it is. Understood. Jeremy, thanks so much for taking my questions. Thanks, Steve. Next we'll go to the line of Saul Martinez from hsbc. Please go ahead. Hi, good morning. Thanks for taking my question. Jeremy, can you give an update on the stressed capital buffer? You noted obviously that you think there is an error in the Fed's calculation due to oci? Can you just give us a sense of what the dialogue with the Fed looks like? Is there a process to modify the ECB higher and if you can give us a sense of what that process looks like. Yeah, so I'm not going to comment about any conversations with the Fed, you know, not to confirm or deny that they even exist. You know that stuff is private and you know, so. And then if you, if you talk about like the timing here. Right. So you know that the stress capital buffer that's been released at 3.3% is a preliminary number. By rule, the Fed has to Release that by August 31st. It may come sooner. You know, you talked about an error in the calculation. We haven't used that word. You know, what we know, what we believe rather is that the amount of OCI gain that came through the Fed's disclosed results looked non intuitively high to us. And you know, if you adjust that in ways that we, we think are reasonable, you know, you would get a slightly higher stress capital buffer. Whether the Fed agrees and whether they decide to make that change or not is up to them and you know, know, we'll see what happens. I think the larger point is that if you look at the industry as a whole and if you sort of put us into that with some higher pro forma scb, whatever it might conceivably be, you actually see once again quite a bit of volatility in the year on year change in the stressed capital buffer for many firms. And just sort of reiterating. And another example of what we've said a lot over the years, that it's volatile, it's untransparent, it makes it very hard to manage capital of a bank, it leads to excessively high management buffers. And we think it's really not a great way to do things. So I'll leave it at that. Okay, got it. That's helpful. Just following up on capital returns. On Steve's question, I think you highlighted in response it's a matter of when, not if. And obviously Jamie's not there. He can't speak for Jamie, but seems to have shown limited enthusiasm for a special dividend or buybacks at current valuations. Can you just give us a sense of how you're thinking about the various options? Any updated thoughts on a special dividend and can you do other things like for example, have a material increase in your dividend payout, sort of a step function increase where, you know, keep that flat and grow into that, grow your earnings into that over time. Can you just maybe give us a sense of how you're thinking about what, you know, what options you have available to deploy that you know that capital? Sure, yeah. I mean, I would direct you to read. I'm sure you have Jamie's comments at the industry conference where he participated the week after Investor Day, because he went into a good amount of detail on this stuff addressing some of these points. And I think his comment there about the special dividend was that it's not really our preference. We hear from people that many of our investors wouldn't find that particularly appealing. And he said as much that it wouldn't be sort of our first choice. So I think the larger point is just that a little bit to your question, there are a number of tools in the toolkit and they're really the same tools that are part of our capital hierarchy. So first and foremost, we're looking to deploy the capital into organic or inorganic growth. And then the dividend. I think we're always going to want to keep it in that sort of like sustainable and also sustainable in a stressed environment. So that continues to be the way we think about that. And then at the end of it, it's buybacks. And Jamie's been on the record for over a decade, I think over many shareholder letters, talking about how he thinks about price and buybacks and valuation and price is a factor that's sort of the totality of the set of options, I guess. Okay, great. Thanks a lot. Thanks all. Next we'll go to the line of Ken Uzdin from Jefferies. Please go ahead. Thanks a lot. Good morning, Jeremy. Jeremy, great to see the progress on investment banking fees up sequentially and 50% year over year. And I saw you on the tape earlier just talking about still regulatory concerns a little bit in the advisory space. And we clearly didn't see the debt pull forward play through because your DCM was great. Again, I'm just wondering just where you feel the environment is relative to the potential and just where the dialogue is across the three main bucket areas in terms of how does this feel in terms of a current environment versus a potential environment that we could still see ahead. Thanks. Yeah, thanks, Ken. It's progress, right? I mean, we're happy to see the progress. You know, people have been talking about the depressed banking fee wallet for some time and it's nice to see not only that you're on your pop from a low base, but also a nice sequential improvement. So that's the first thing to say in terms of dialogue and engagement, it's definitely elevated. So, you know, the dialogue on ECM is elevated and the dialogue on M and A is quite robust as well. So all of those are good things that encourage us and make us hopeful that we could be seeing sort of a better trend in this space. But there are some important caveats. So on the DCM side, yeah, we made pull forward comments in the first quarter, but we still feel that this second quarter still reflects a bunch of pull forward and therefore we're reasonably cautious about the second half of the year. Importantly, a lot of the activity is refinancing activity as opposed to for example acquisition finance. So the fact that M and A remains still relatively muted in terms of actual deals has knock on effects on DCM as well. And when a higher percentage of the wallet is refi, then the pull forward risk becomes a little bit higher on ecm. If you look at it kind of at a remove, you might ask the question, given the performance of the overall indices, you would think it would be a really booming environment for IPOs, for example. And while it's improving, it's not quite as good as you would otherwise expect. And that's driven by a variety of factors, including the fact that as has been widely discussed, the extent to which the performance of the large industries is driven by like used stocks, the sort of mid cap tech growth space and other spaces that would typically be driving IPOs have had much more muted performance. Also a lot of the private capital that was raised a couple years ago was raised at pretty high valuations. And so in some cases people looking at IPOs could be looking at down rounds. That's an issue. And while secondary market performance of IPOs has improved meaningfully in some cases people still have concerns about that. So those are a little bit of overhang on that space. I think we can hope that over time that fades away and the trend gets a bit more robust. And yeah, on the advisory side, the regulatory overhang is there, remains there and so we'll just have to see how that plays out. Great, thank you for all that, Jeremy. And just one, on the consumer side, just anything you're noticing in terms of people just have been waiting for this delinquency stabilization. On the credit card side, obviously your loss rates are coming in as you expected and we did see 30 days pretty flat and 90 days come down a little bit. Is that seasonal? Is it just a good rate of change trend? Any thoughts there? Thanks. Yeah, I still feel like when it comes to card charge offs and delinquencies, there's just not much to see there. It's still, it's normalization, not deterioration. It's in line with expectations. You know, as I say, we always look quite closely inside the cohorts, inside the income cohorts. And you know, when you look in there specifically for example on spend patterns, you can see a little bit of evidence of behavior that's consistent with a little bit of weakness in the lower income segments where you see a little bit of rotation of the spend out of discretionary into non discretionary. But the effects are really quite Subtle and in my mind definitely entirely consistent with the type of economic environment that we're seeing, which while very strong and certainly a lot stronger than anyone would have thought given the tightness of monetary conditions, say like they've been predicting it a couple years ago or whatever, you know, you are seeing slightly higher unemployment, you are seeing moderating GDP growth. And so it's not entirely surprising that you're seeing a tiny bit of weakness in some pockets of spend. So it all kind of hangs together in what is in some sense actually not a very interesting story. Thank you. Thanks, Ken. Next we'll go to the line of Glenn Shore from Evercore isi. Please go ahead. Hi, thanks very much. So Jeremy, the discussion so far around private credit and you all your recent comments have been the ability to add on balance sheet and compete when you need to compete on the credit creditfront. And I do think that most of that discussion has been about the direct lending component. So I'm curious if you're showing more progress and activity on that front and then very importantly, do you see the same trend happening on the asset backed finance side? Because that's a bigger part of the world and it's a bigger part of your business. So I'd appreciate your thoughts there. Thanks. Yeah. Thanks, Glenn. So on private credit, so nothing really new to say there. I think. I guess one way the environment's evolving a little bit is that as you know, a lot of money has been raised in private credit funds looking for deals. And sort of a little bit to my prior comments, in a relatively muted acquisition finance environment, you know, at this point you've got a lot of money chasing like not that many deals. So the space is a little bit quieter than it was at the margin. Another interesting thing to note is some of this discussion about kind of lender protections that were typical in the syndicated lever finance market making their way into the private market as well as sort of people realize that even in the private market you probably need some of those protections in some cases, which is sort of supportive of the theme that we've been talking about, about convergence between the direct lending space and the syndicated lending space, which is kind of our core thesis here, which is that we can offer best in class service across the entire continuum, including secondary market trading and so on. So we feel optimistic about our offering there. I think the current environment is maybe a little bit quieter than it was. So it's maybe not a great moment to kind of test whether we're doing a lot more or less in this space. So to speak. And then on asset backed financing, you actually asked me that question before and at the time my answer was that I hadn't heard much about that trend. And that continues to be the case. But clearly there must be something I'm missing. So I can follow up on that and maybe we can have a chat about it. No, it's great for you if you're not hearing much about it, so we could leave it at that. Maybe just one quick follow up in terms of your just overall posturing. You were patient and smart when rates were low, waited to deploy, worked out great. We know that story now. It seems like you have tons of excess liquidity and you're being patient and rates are high. And I'm curious on how you think about what kind of triggers, what kind of things you're looking for in the market to know if and when you would extend duration. Right. I mean, on duration, you know, in truth, we have actually added a little bit of duration over the last couple quarters. So, you know, that's one thing to say that was more last quarter than this quarter. But I guess I would just caution you from a little bit away from looking at kind of our reported cash balances and our balance sheet and concluding that, you know, when you look at the duration concept holistically, that there is a lot to be done differently on the duration fund. So clearly it's true that empirically we've behaved very asset sensitively in this rate hiking cycle and that has resulted in a lot of excess NAI generation on the way up in the near term. But when we look at the firm's overall sensitivity to rates, we look at it through both the ear type lens, the short term NI sensitivity, but also a variety of other lenses, including various types of scenario analysis, including impacts on capital from higher rates. As I think Jamie has said a couple times, we actually aim to be relatively balanced on that front. Also, given like the inverted yield curve, it's not as if extending duration from these levels means that you're locking in 5.5% rates. In fact, the forwards are not that compelling given our views about some sort of structural upward pressures on inflation and so on. So I think when you put that all together, I don't think that kind of a big change in duration posture is a thing that's front of mind for us. Super helpful. Thanks so much for that. Thanks, Glenn. Next we'll go to the line of Matt O'Connor from Deutsche Bank. Please go ahead. Good morning. I was just wondering if you can elaborate on essentially the Math behind the Roxy being too high at 20 and more normalized at 17. Obviously you pointed to over earning on NetII and I guess the question is, is that all of it to go from 20 to 17 and if so, is that all consumer deposit costs or are there a few other components that you could help frame trust? Sure, good question, Matt. I mean, I guess the way I think about it is a couple things like, you know, our returns tend to be a bit seasonal, right? So if you kind of build yourself out a full year forecast and make reasonable just based on your own or analyst consensus, whatever, and you think about fourth quarter, like better to look at this on a full year basis when you think about the returns and the quarterly numbers and you actually have to strip out kind of the one time items. So if you do that like whatever you get for this year is still clearly a number that's higher than the 17%. So yeah, one source of headwinds is normalization of. One source of headwinds is normalization of the NII primarily as a result of expected higher deposit costs. That's, you know, we've talked about that part of it is also the yield curve effects. Some cut will come into the curve at some point. And you know, in the normal course if you kind of do a very, very, very simple mental model of the company, you would have like expenses growing, revenues growing at some organic GDP like rate, maybe higher and expenses growing at a similar slightly lower rate, producing a sort of relatively stable overhead ratio. But even if the amount of NII normalization winds up being less than we might have thought at some prior point, you still have some background, you know, you still have some normalization of the overhead ratio that needs to happen. So as much as you know, our discipline on expense management is, you know, as tight as it always has been, there inflation is still non zero. There are still investments that we're executing. There's still higher expense to come in a slightly flatter revenue environment as a result of in part the normalization of nii. And then the final point is that whatever winds up being the answer on Basel III Endgame and all the other pieces, you have to assume some amount of expansion of the denominator, at least based on what we know so far. So of course any of those pieces could be wrong, but that's kind of how we get to our 17%. And if you look at the various scenarios that we showed on the last page of my Investor Day presentation, it illustrates those dynamics and also how much the range could actually vary as A function of the economic environment and other factors. Yes, that was a really helpful chart. Just one follow up on the yield curve effects, I guess. What do you mean by that? Because right now the yield curve is inverted. Maybe you're still believing in the impact of that, but kind of longer term you'd expect a little bit of steepness of the curve, which I would think would help. But what did you mean by that? Thank you. Yeah, I mean you and I have talked about this before. I guess I sort of, I guess I don't really agree fundamentally with the notion that the way to think about things is that sort of yield curve steepness above and beyond what's priced in by the forwards is a source of structural NII or NEM for banks, if you know what I mean. I mean people have different views about the so called term premium. And obviously in a moment of inverted curve and different types of treasury supply dynamics, people's thinking on that may be changing. But I think we saw when rates were at zero and the 10 year note was below 2%, everyone sort of, many people were kind of tempted to try to get extra NIM and extra NII by extending duration a lot. But when the steepness of the curve implies is driven by the expectation of actually aggressive Fed tightening, it's just a timing issue and you can wind up kind of pretty offsides from the capital and other perspectives. So there are some interesting questions about whether fiscal dynamics might result in a structurally steeper yield curve down the road and whether that could be sort of earning. The term premium, so to speak could be a source of nii, but that feels a bit speculative to me at this point. Got it. Okay, thank you for the details. Thanks, Matt. Next we'll go to the line of Mike Mayo from Wells Fargo Securities. Please go ahead. Hi Jeremy. You said it's too early to end the over earning narrative and you highlighted higher deposit costs and the impact of lower rates and lower NII and DCM pull forward and credit costs going higher. Anything I'm missing in that list and what would cause you to end the over earning narrative? No, actually I think that is the right list, Mike. I mean, frankly, I think one thing that would end the over earning narrative is if our annual returns were closer to 17%. I mean to the extent that that is through the cycle number that we believe and that we're currently producing more than that, that's one very simple way to look at that. But the pieces of that are the pieces that you talked about and the single most important piece is the deposit margin, our deposit margins are well above historical norms and that is a big part of the reason that we still are emphasizing the over earning. You're 17% through the cycle roti an expectation. What is the CET1 ratio that you assume for that? I mean, we would generally assume requirements plus a reasonable buffer, which depending on the shape of rules, could be a little bit smaller, a little bit bigger, in no small part as a function of the volatility of those rules, which goes back to my prior comments on SCB and ccar. But obviously, as you well know, what actually matters is less the ratio and more the dollars. And at this point, the dollars are very much a function of where rules land and where the RWA lands and you know, and obviously things like G SIB recalibration and so on. So we've done, you know, a bunch of scenario analysis along the lines of what I did in Investor Day that informs those numbers. But that is obviously one big element of uncertainty behind that 17%, which is why at Investor Day, when we talked about it, both Daniel and I were quite specific about saying that we thought 17% was still achievable, assuming a reasonable outcome on the Basel III end game. Let me just zoom out for one more question on the return target. I mean, when I asked Jamie at the 2013 Investor Day, you know, would it make Sense to have 13.5% capital? He was basically telling me to take a hike. Right. And now you have 15.3% capital and you're saying, well, we might want to have a lot more capital here. I mean, at some point, if you're spending $17 billion a year to improve the company, if you're gaining share with digital banking, if you're automating the back office, if you're moving ahead with AI, you're doing all these things that I think you say others aren't doing, why wouldn't those returns go higher over time? Or do you just assume you'll be competing those benefits away? Thanks. Yeah. I mean, I think, in short, Mike, you know, we've talked about this a lot and Jamie's talked about this a lot. It's a very, very, very competitive market, you know, and we're very happy with our performance, we're very happy with the share we've taken. And 17% is like an amazing number actually. And to be able to do that, given how robust the competition is from banks, from non banks, from US banks, from foreign banks and all the different businesses that we compete in, is something that we're really proud of. So the number has a range around it, obviously. So it's not a promise, it's not a guarantee, and it can fluctuate. But we're very proud to be in the ballpark of being able to think that we can deliver it again, assuming the reasonable outcome on the puzzle through the end game. But it's a very, very, very competitive market across all of our products and services and regions and client segments. All right, thank you. Next we'll go to the line of Betsy Grasik from Morgan Stanley. Please go ahead. Hi, Jeremy. Hi, Jeremy. So I did want to ask one drill down question on 2Q, and it's related to the dollar amount of buybacks that you did do. I think in the press release right in the slide deck, it's 4.9 billion common stock net repurchases. So the question here is, what's the governor for you on how much to do every quarter? I understand it's a function of, okay, how much do we organically grow? But even with that, so you get the organic growth, which you had some nice movement there, but you do the organic growth and then is it how much do we earn and we want to buy back our earnings or how should we be thinking about what that repurchase volume should be looking like over time? I remember at Investor Day the whole debate around I don't want to buy back my stock, but we are. I get this question from investors quite a bit of how should we be thinking about how you think about what the right amount is to be doing here? Yeah, that's a very good and fair question, Betsy. So let me try to unpack it to the best of my ability. So in no particular order, one thing that we've really tried to emphasize in a number of different settings, including in our recent 10 Qs actually, is that we don't want to get into the business of guiding on buybacks. So we're going to buy back whatever we think makes sense in the current moment, sort of, and we preserve the right to sort of change that at any time. So I recognize that not everyone loves that, but that is kind of a philosophical belief and so I might as well say it explicitly. It was pretty clear in the queue also, but I'm just going to say that again. So that's point one. But having said that, let me nonetheless try to address your point on framework and governors. So generally speaking, we think it doesn't make sense to sort of exit the market entirely unless the conditions are much more unusual than they are. Right now let's say obviously when, for whatever reason, if we ever need to build capital in a hurry, we've done it before and we're always comfortable suspending buybacks entirely. But I think some modest amount of buybacks is a reasonable thing to do when you're generating your kind of capital. And so we were talking before about this 2 billion pace. We kind of trying to move away from this notion of a pace, but that's where that idea comes from, let's put it that way. You talked about the 4.9, which I recognize may seem like a little bit of a random number, but where that actually comes from is the other statement that we made that we have these significant item gains from Visa. And if you think about what that means, it means that we have post the acceptance of the exchange offer a meaningful long position and a liquid large cap financial stock that is Visa, which realistically is highly correlated to our own stock. And so in some sense why carry that instead of just buying back JP Morgan stock? So we talked about, Jamie talked about as we liquidate the Visa, deploying those proceeds into jpm and that's what we did this quarter. So that is why the 4.9 is a little higher. And it's consistent with my comments at Investor Day around having slightly increased the amount of buybacks. And beyond that, what you're left with is my answer to Steve's question, which is that to your point about buying back earnings or whatever, when we're generating these types of earnings and there's this much organic capital being generated in the absence of opportunities to deploy it organically or inorganically and while continuing to maintain our healthy but sustainable dividend, if we don't return the capital, we are going to Keep growing the CT1 ratio to levels which if you think about the long strategic outlook of the company, are not reasonable. They're just artificially high and unnecessary. So one way or the other that will need to be addressed at some point. It's just that we don't feel that now is the right time. All right, thank you, Jeremy, appreciate it. Thanks, Betsy. Next we'll go to the line of Gerard Cassidy from RBC Capital Markets. Please go ahead. Hi Jeremy, how are you? Hi, Gerard. Jeremy, can you. I know you touched on deposits earlier in the call in response to a question I noticed on the average balances, the non interest bearing deposits were relatively stable quarter to quarter versus prior quarters when they have steadily declined. And this is one of the areas of course, investors are focused on in terms of the future of the Net interest margin for you and your peers. Can you elaborate if you can, what you're seeing in that non interest bearing deposit account? I know this is average and not period and the period end number may actually be lower, but what are you guys seeing here? Yeah, good question, Gerard. I have to be honest, I hadn't focused on that particular sequential explain that is quarter on quarter change and average non interest bearing deposits. But I think the more important question is the big picture question, which is what do we expect? How are we thinking about ongoing migration of non interest bearing into interest bearing in the current environment and how that affects our RNI outlook and our expectation for weighted average rate paid on deposits? And the answer to that question is that we do continue to expect that migration to happen. So if you think about it, you know, in the wholesale space, you know, you have a bunch of clients with some balances in non interest bearing accounts and over time for a variety of reasons we do see them moving those balances into interest bearing. So we do continue to expect that migration to happen and therefore that will be a source of headwinds. And you know that migration sometimes happens internally, that is out of non interest bearing into interest bearing or into CDs, sometimes it goes into money markets or into investments which is what we see happening in our wealth management business. And you know, some of it does leave the company. But one of the things that we're encouraged by is the extent to which we are actually capturing a large portion of that yield seeking flow through CDs and money market offerings, et cetera, across our various franchises. So big picture, I do think that migration out of non interest bearing into interest bearing will continue to be a thing and that is a contributor to the modest headwinds that we expect for NII right now. But yeah, I'll leave it at that I guess. Very good. And as a follow up, you've been very clear about the consumer credit card charge offs and delinquency levels. And we all know about the commercial real estate office and you always talk about over earning on net interest income. Of course one of the great credit quality stories for everyone, including yourselves, is the C and I portfolio. How strong it's been in this elevated rate environment. I know your numbers are still quite low, but there in the corporate investment bank you had about a $500 million pickup in non accrual loans. Can you share with us what are you seeing in cni? Are there any early signs of cracks or anything? And again I know your numbers are still good, but I'm Just trying to look forward to see if there's something here over the next 12 months or so. Yeah, it's a good question. I think the short answer is no. We're not really seeing early signs of cracks in cni. I mean, yes, I agree with you. Like the CNI charge off rate has been very, very low for a long time. I think we emphasized that at last year's Investor Day, if I remember correctly. I think the CNI charge off rate over the preceding 10 years was something like literally zero. So that is clearly very low by historical standards. And while we take a lot of pride in that number, and I think it reflects the discipline and our underwriting process and the strength of our, of our credit culture across bankers and the risk team, we don't actually run that franchise to like a zero loss expectation. So you have to assume there'll be some upward pressure on that. But, you know, in any given quarter, the CNI numbers tend to be quite lumpy and quite idiosyncratic. So I don't think that anything in the current quarter results is indicative of anything broader. And I haven't heard anyone internally talk that way. I would say great. Appreciate the insights as always. Thank you. Thanks, Gerard. Next we'll go to the line of Erika Najarian from ubs. Please go ahead. Hi, good morning. I just had one cleanup question, Jeremy. The consensus provision for 2024 is 10.7 billion. Could you maybe clarif for once and for all, sort of Jamie's comments at an industry conference earlier and, you know, try to sort of triangulate if that 10.7 billion provision is appropriate for the growth level that you are planning for in card. Yeah, happy to clarify that. So Jamie's comments were that the allowance, the build and the card allowance, we're talking about Card specifically, we expected something like 2 billion for the full year. As I said here today, our expectation for that number is actually slightly higher, but, you know, it's in the ballpark. And I think in terms of what that means for the consensus on the overall allowance change for the year, you know, last time I checked it still looked a little low on that front, so who knows what it'll actually wind up being? But that remains our view. One question that we've gotten is how to reconcile that build to the 12% growth in OS that we've talked about, because it seems like a little bit high relative to what you would have otherwise assumed if you apply some sort of a standard coverage ratio to that growth. But the reason that's the case is essentially a combination of higher revolving mix as we continue to see some normalization revolve in that 12% as well as seasoning of earlier vintages which comes with slightly higher allowance per unit of OS growth. Great, thank you. Thanks Erica. And for our final question we'll go to the line of Jim Mitchell from Seaport Global Securities. Please go ahead. Hey, good morning. Maybe just one last question on sort of deploying excess capital. Seems like the two primary ways to do that organically would be through the trading book or the loan book. So maybe two questions there. One, trading assets were up 20% year over year. Is that you leaning into it or just a function of demand and is there further opportunities to grow that? And then secondly, outside of cards, loan demand has been quite weak. And any thoughts from you on if you're seeing any change in demand or how you're thinking about loan demand going forward? Thanks. Thanks Jim. Good question. So yeah, trading assets have been up. That is basically client activity, primarily secure financing related sort of match book repo type stuff and similar things that are gross up the balance sheet quite a bit but are quite low risk and therefore quite low RWA intensity. So while our ability to supply that financing to clients is something that we're happy about and it very much represents us leaning into the franchise to serve our clients, it's not really particularly RWA and therefore capital intensive and therefore it doesn't really reflect an aggressive choice on our part to deploy capital, so to speak, on the loan demand front. Yeah, I mean, unfortunately I just don't have much new to say there on loan demand. Meaning to your point, loan demand remains quite muted everywhere except card. Our card business is of course, course in no way capital constrained. So whatever growth makes sense there in terms of our customer franchise and our ability to acquire accounts and retain accounts and what fits inside our credit risk appetite is growth that's going to make sense. And so we're very happy to deploy capital to that, but it's not constrained by our willingness or ability to deploy capital to that. And of course, you know, for the rest of the loan space, the last thing that we're going to do is have the excess capital mean that we lean in to, you know, lending that is not inside our risk appetite or inside our credit box. You know, especially in a world where spreads are quite compressed and terms are under pressure. So there's always a balance between capital deployment and, you know, assessing economic risk rationally. And frankly that is in some sense a microcosm of the larger challenge that we have right now. You know, when I talked about if there was ever a moment where the opportunity cost of not deploying the capital relative to how attractive the opportunities outside the walls of the company are, now would be it. In terms of being patient, that's a little bit one example of what I was referring to. Right. Okay, great. Thanks. Thanks, Jim. And we have no further questions. Very good. Thank you, everyone. See you next quarter. Thank you all for participating in today's conference. You may disconnect your line and enjoy the rest of your day.",
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    "call_id": "Exxon Mobil Q3 24",
    "call_title": "Exxon Mobil Q3 24 Conference Call",
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      "transcript_id": "a3e85034-23ed-4161-9648-835fdb3a4347",
      "call_id": "Exxon Mobil Q3 24",
      "text": " Good morning everyone. Welcome to ExxonMobil's third quarter 2024 earnings call. Today's call is being recorded. We appreciate your joining us today. I'm Jim Chapman, Vice President Treasurer and Investor Relations. I'm joined by Darren Woods, Chairman and CEO and Kathy Michaels, Senior Vice President and cfo. This quarter's presentation and prerecorded remarks are available on the Investors section of our website. They're meant to accompany the third quarter earnings news release which is posted in the same location. During today's presentation we'll make forward looking comments including discussion of our long term plans and integration efforts which are still being developed and which are subject to risks and uncertainties. Please read our cautionary statement on slide 2. You can find more information on the risks and uncertainties that apply to any forward looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides which are also posted on the website. And now I'll turn it over to Darren for some opening remarks. Good morning and thanks for joining us. ExxonMobil announced earnings of $8.6 billion this morning, one of our best third quarters in the past decade. Even more importantly, this quarter's results continue to demonstrate our enterprise wide transformation is improving the earnings power of the company. Our energy products business provides a compelling proof point. In 2024 year to date, earnings are roughly double what they were in the same period of 2019. On a constant margin basis for all of our businesses we've been focused on reduced cost, high return investments and selected investments to improve profitability, particularly in bottom of cycle conditions. This work has fundamentally transformed our refining business. For instance, we've high graded our portfolio by divesting less advantaged sites. At the time of the Exxon and Mobile merger, we had 45 refineries. In 2017 when I stepped into this job we had 22. I expect to end this year with 15, bringing us very close to an entire portfolio advantaged by location and configuration. We've also significantly improved our product yield by investing in assets such as the Rotterdam Advanced Hydro Cracker and the Bullmine expansion. We've increased the yield of higher value products from lower value feeds. Finally, we've achieved dramatic structural cost savings in our overall product solutions business. We reduced costs by $5 billion versus 2019 in energy products specifically. To take one example, we completed our first half 2024 turnarounds for 200 million dol million less than the previous turnarounds on these assets, a 24% reduction. Our results from the quarter also demonstrate the value of diversification by geography, resource and product mix, providing natural hedges that increase the stability of earnings. In the third quarter, while liquid prices and refining margins were down, gas realizations, chemical margins and specialty margins were all up. Underpinning our results is a relentless focus on execution excellence. We saw a good example of this in the quarter at our Joliet refinery in Illinois. In July, a tornado ripped through the site, cutting power, steam, instrument air and potable water. We've never had a harder shutdown, with extensive damage to the transmission system that provides power to the site. We were cold for almost two weeks. This was an unprecedented event that severely impacted fuel supplies for the entire region. Our community, the City of Chicago, local, state and federal governments were all counting on a quick recovery. I'm proud to say that the men and women of Joliet, with a lot of support from across the corporation, delivered. Thanks to their remarkable efforts, we beat an aggressive recovery schedule. And we're supplying much needed fuel to the market far faster than we thought possible, reducing the time to recover by a third. I want to take this opportunity on behalf of all their colleagues at ExxonMobil and the communities that depend on them, to thank everyone involved in the recovery for their hard work, commitment and personal sacrifice. Thank you. You did us proud. As always, our success is our shareholder's success. This morning, we announced a 4% increase to the quarterly dividend to 99 cents per share. We've now increased our annual dividend for 42 years in a row, putting us in an elite tier of the companies known as dividend aristocrats. Less than 4% of S&P 500 companies have paid higher dividends every year for more than 40 years. We've also sustained our position in the top five of all S&P 500 companies with the largest dividends paid. We know how important the dividend is to our investors. Particularly our millions of retail shareholders remain committed to a sustainable, competitive and growing dividend, which is a key component of the attractive total shareholder return we are delivering. In the first nine months of 2024, we've generated a TSR of 20%, leading all IOCs, just as we've done over the last three, five and 10 years. Turning to our upstream business, the portfolio of advantage assets we've built is the envy of the industry. In the third quarter, we grew production to 4.6 million oil equivalent barrels per day, a 24% increase versus the prior year quarter. To drive higher value, we continue to improve the profitability of the barrels we produce. Our progress has been exceptional on a constant price basis. Our 2019 unit earnings were about $5 per oil equivalent barrel year to date. In 2024, excluding Pioneer, we've doubled that to $10 per barrel. The third quarter was our first full quarter with Pioneer which added 770,000 oil equivalent barrels per day of highly advantaged production. As we said when we announced the deal, combining our technology Pioneers contiguous acreage and the capabilities of our two organizations is allowing us to recover more resource more efficiently with a lower environmental footprint. In the third quarter we drilled the longest ever laterals on pioneer acreage at 18,350ft or nearly three and a half miles. We're scheduled to spud the first ever 20,000 foot laterals on Pioneers acreage this quarter. The benefits of long laterals are significant fewer wells, a smaller surface footprint and greater capital efficiency. In Guyana, we completed tie ins for the country's Gas to Energy project on budget and schedule and we are back to full production once the government completes the associated power plant. The Gas to Energy project is expected to provide the people of Guyana with electricity that is significantly cheaper, cleaner and more reliable. This will further spur the Guyanese economy which was the fastest growing in the world in the first half of 2024 with GDP up 50%. Our Payara project, which remained online during the tie ins, continues to perform above investment basis. As has been the case with all the projects we've brought online in the world's premier deep water development, we'll have much more to say about the upstream business during our spotlight next month. I promised Neil I wouldn't steal his thunder, so let me just say on the Pioneer synergies alone, which are considerably higher than expected, we think you'll find the story compelling. As I've said many times, we're a technology company managing and transforming molecules to provide products that meet society's greatest needs and deliver attractive returns in our low carbon solutions business. We continue to lay the groundwork for the world's largest low carbon hydrogen production facility at our integrated site in Baytown. The facility represents a new energy value chain and will produce 1 billion cubic feet per day of virtually carbon free hydrogen with 98% of the CO2 emissions captured and stored in the third quarter. Two new partners joined the project to accelerate market development for this new energy value chain. ADNOC has taken a 35% equity stake in the facility. We're pleased to add their proven experience and global market insights to this world scale project. In addition, Mitsubishi signed an agreement for the potential offtake of low carbon ammonia and equity participation in the project. The ammonia will be used to generate power and heat for industrial applications in Japan, helping to establish a new supply chain for low carbon energy. The agreement with Mitsubishi follows a similar agreement earlier this year with Jarrah, Japan's largest power generator. While we still have some hurdles to clear, we're encouraged by the growing market recognition of the significant value and advantages of this first in the world low carbon project. Of course, the highest hurdle, as we've said, is the translation of the IRA's technology agnostic legislation into enabling regulations that maintain focus on the what carbon intensity and not the how. We are ready to move forward once the Biden Administration publishes regulations consistent with the legislative intent. Assuming this happens, we plan to reach FID in 2025 with startup in 2029. We've also made noteworthy progress on the CCS front. In October, we announced an agreement with our first natural gas processing customer to Transport and store 1.2 million metric tons of CO2 per year. This is our fifth agreement overall and brings our total CO2 contracted for storage to 6.7 million metric tons per year, more than any other company. In addition, we secured the largest offshore CO2 storage site in the United States through an agreement with the Texas General land office. The 271,000 acre site further solidifies the US Gulf coast as a leading market for carbon capture, transport and storage. In addition to lcs, we're advancing other technology driven businesses that have huge potential. We've spoken before about our Proxima thermoset resin, which is a revolutionary new material that is stronger, lighter and more corrosion resistant than conventional alternatives. We see a total addressable market in this space of 5 million tons per year and $30 billion by 2030. One major application of Proxima is rebar that is only 1/4 the weight but twice as strong as steel. In the third quarter, we signed a licensing agreement with Novocus Corporation, a North American manufacturer of rebar from Proxima that allows rebar to be produced anywhere in the world. Rebar is just one example of Proxima's value in use. Others include high performance coatings and a range of lightweighting applications for automobiles. In our carbon materials venture, we see a massive opportunity in the market for battery anode materials which could grow at 25% per year and like Proxima, reach $30 billion by 2030. The primary material in battery anodes is graphite and we've developed proprietary technology that allows us to produce feedstock for next generation Graphite at scale, this innovative material has the potential to improve EV battery range by 30% and enable faster charging. ExxonMobil's history with transportation dates to the very beginning of the automotive age when we provided fuel for Henry Ford's first automobiles. Some might find it ironic, but with the work we're doing in lithium for cathodes, graphite for anodes, proxima as a lightweight battery case, and the plastics, lubricants and cooling fluids we already provide, we may become one of the most important players in a new automotive age of EVs. At our corporate plan update next month, we'll highlight how we're investing in technology based high return growth opportunities across all of our businesses. From the upstream to product solutions to LCs to new growth areas. What I would leave you with today is this. All our success are continuously improving profitability, our execution excellence, our technological innovation and our tremendous portfolio of growth opportunities flows from our strategy and focus on fully leveraging our core capabilities and competitive advantages. The most important being our people. We have the best team in this industry and in my view, any industry. I look forward to sharing more of their work during the corporate plan update. Thank you. Thank you, Darren. Now let's move to our Q and A session and as a reminder, we ask each participant to keep it to just one question and with that operator, we'll ask you to please open the line for the first question. Thank you. The question and answer session will be conducted electronically. If you'd like to ask a question. Key followed by the digit 1 on your telephone. Please do so by pressing the star. The first question comes from Devin McDermott of Morgan Stanley. Hey, good morning. Thanks for taking my question. So Darren, you had some helpful prepared remarks on the downstream business, so I actually wanted to start there. If we look at results in the quarter quarter they were strong and actually looks like they came in a bit ahead of what was implied by the 8k earnings considerations. Even with that Joliet impact you discussed and softening crack spreads in the quarter, and it looks like margin capture, volume costs were all factors here, I was wondering if you could just talk through some of the latest market trends you're seeing across your refining footprint, the drivers of that beat versus the earnings considerations, and then specifically how some of the strategic projects are impacting results relative to your expectations. Yes, sure, Devin, I'll start with that and then see if Kathy wants to add anything. I think you've got to kind of step back to the broader approach that we've established with the downstream business. And its integration into the new company of product solutions. Which is really looking at how you optimize the full value chain. That, I think is a fundamentally different approach to how we were historically running a refining business. And looking at all the value levers to pull. From bringing crude in to the refineries, all the way out to marketing the products. And I think the results that we see in that business Are reflective of a collection of those efforts across the whole. In addition to a lot of the cost cutting that we've been doing to reduce structural cost. And the effectiveness and improvements that we're seeing. By centralizing a lot of activities. And bringing the best thinking of the corporation to bear on each part of the business that we're operating. A great example in the refining business has been the centralization of the maintenance approach that we're doing. Not just in turnarounds, but in our routine day to day maintenance. That has brought a huge amount of value and lower cost to our refineries operating around the globe. By taking the best thinking across both our upstream and downstream and chemical businesses, Consolidating that into a single approach. And then effectively executing that at each of the sites. Is driving huge, huge value. I think too, eliminating what was somewhat of an artificial barrier. Between our chemical businesses in the facility and our refining business in the facility. And making sure that the organization thinks about the whole and optimizes the whole. And the disposition of each stream as it flows through those facilities is having a big impact. I would say the optimization of the facility and the molecules that flow to those facilities. Irrespective of whether it's a product that goes into the petroleum product space. Or whether it goes into the chemical product space, I think has been a significant uplift. And then on top of that, I would say the thinking about the channels to market and the value uplift, we can get through those channels. And bringing a trading organization along and thinking about them as a value channel to optimize across the value chain that our refineries participate. Is also bringing additional value and making sure that we're maximizing the value in the placement value of all the barrels that come out of the refinery and all the products that come out of the refinery. So there's a collection of things that have been changed over the years. That are fundamentally different than how we've historically been running the business. And obviously some of those and the benefits of those will move with the market environment and the available spreads in the market. But generally speaking, it's a combination of a lot of things that we've been working on to drive value in that business along with the others. Kathy, anything to add? You know, the only thing that I'd add is we try pretty hard to demonstrate in the materials we provide you with earnings, the underlying big movers that are improving, you know, the earnings power of the company. And so in this case, I'd say we put forward the year to date results more so than just the quarter because that's a bit easier then to see that coming through our results. So if you look at our energy product business on a year to date basis, you'll see that we got about a half a billion dollar uplift from advantaged project growth as well as cost savings. Right. And so that's coming from both the Beaumont expansion as well as Permian Crude Ventures and all the structural cost savings that we're driving, not just through the energy products business, but obviously more broadly for the company. And then early on in the question you referenced, we came in a bit better than what the street was expecting in this area. One of the reasons we came in better was the much faster startup at Joliet. And so we had given some guidance on what we thought that impact was going to be. And the team just did a wonderful job in restarting that facility safely and more quickly than we had expected. And that also really accrued to our bottom line. Great. Appreciate the detailed response. Thanks. Thank you, David. The next question is from Neil Mehta of Goldman Sachs. Yeah, good morning, Darren. Kathy and team just wanted to spend some time talking about the startups of the key LNG projects and maybe you could talk about where we stand in. Terms of de risking Golden Pass and. Bringing that into service. And then we get less visibility on what's happening in Qatar. But it's going to be a big. Important project, Northfield expansion. So to the extent you're able to, can you just share your perspective of. How that's going on the ground? Yeah. Good morning, Neil. Thanks for the question. I'll just say, obviously the Golden Path venture is managing the project and we're contributing as best we can and obviously worked with the venture in response to the bankruptcy. That team, I think is making really good progress at reoptimizing the work and the schedule. We anticipate today that that venture will basically be delayed by about six months. So we expect to see first LNG out of that train back end of 2025 potentially slipping over into the new year, but it'll be in that time frame that we see. And then of course, each train after that we anticipate about six months separation between the trains coming on. So I think that venture has done a lot of really good work to overcome what was a pretty challenging set of circumstances and we feel pretty good about the path that they're on. There's still more work to do, but I think a really good vector and the fact that the existing contractors that were involved in that venture have stepped in to fill the void and pick up the baton and keep running the race, I think is a huge testament to those and their commitment to the success of this project, along with all the folks at the venture who are working this real hard. So we stay close to it. But the venture organization there really owns that and deserves the credit for the recovery there. I think on Qatar, same thing, we're a participant in there and Qatar Energy obviously is managing those projects, but better place for them to give the status of where the projects are. We feel pretty good about the collaboration and our ability to work hand in glove with Cutter Energy and frankly feel really good about the competitiveness of those projects and so are fairly engaged with those and I think feel good about the work that's happening in that space. And then obviously we're doing work in Papua and looking to make sure we can come up with an attractive project there and looking at opportunities to advance the Mozambique project as well. So we've got a pretty good portfolio of LNG projects that we see going into the future and the market response that we're seeing on those, the potential for those projects is very positive. So we see strong demand signals and frankly a lot of customer interest. So I feel good about the LNG business as a whole and then I think working really constructively through the the projects that are in development or in construction and then making good progress on the concepts and the engineering for the LNG projects to come. Thanks, Darren. Thank you, Neil. The next question is from Doug Leggett of Wolff Research. Hey, good morning everyone. Thanks for having me on. Gosh, Darren, I'm trying hard not to get in front of December, but I would love to ask you a question on Guyana production capacity, or rather production versus production capacity. And I guess my question goes like this. Alistair, I guess has been quoted recently about the next wave of debottlenecking at Payara. A recent field trip that we hosted with you guys down there led us to understand that you haven't even drilled all the development wells on the early phases like Lisa one. And then lastly you've now got Hammerhead coming in on a converted FTSO which typically seems to be a little quicker than the greenfield. So I guess my question is how do you reconcile production versus production capacity? Which I guess is how you've always kind of tried to manage expectations on the outlook for Guyana. Yeah, I think there's a lot of, as you know, having spent some time down there, Doug, a lot of variables at play. And oftentimes those investments that we make are coming in or coming on stream at the back end of the year. And so part of the capacity versus production is just the timing of when we bring those projects on. Then obviously there's the timing of, as we know, all these resources over time deplete. And the organization is working really hard at infill drilling and doing the other things they need to keep capacity utilization high. And so that work and the timing of that and scheduling of that work features into it. So I think a lot of those things go into. We do our best to give all of you a good view of what we expect to be producing versus the capacity. And obviously the organization is working really hard to do an even better job. And everyone, I think that's working that project and as we've demonstrated over the years, is very focused on continuing to operate those facilities in a very environmentally responsible way. We've been very pleased with the low level of flaring that they've managed to achieve. The ability to bring those facilities on really in an outstanding fashion with very low levels of flaring as they start these things up and then continue to run with no routine flaring. And then at the same time really push production to make sure that we're fully utilizing the capital that we put in the ground and doing that very safely. And we continue to surprise ourselves with the ability of those organizations to find ways to fill up that capital. My expectation is they'll continue to do that. Really hard to forecast exactly how successful they are going forward. But we focus on the capacity and then the targets that we're providing you. And we'll give you updates, obviously in our best interest as we sharpen our plans and get a better look at things that we'll bring that forward and share with the rest of you. And I do think when we get into December with the corporate plan review, I know that Neil is anxious to talk about his entire portfolio and the progress that we're making across not only Guyana, but the Permian. So we'll give you some more color commentary then as well. Great. Thanks so much. You bet. Thank you, Doug. The next question is from John Royal of JPMorgan. Hi good morning. Thanks for taking my question. So my question's on your balance sheet. The 5% net debt to capital is very impressive and you're continuing to live within your means on the cash flow side even when the cycle is turning down off of peaks. So my question is, do you consider yourselves under levered at the higher point in the cycle and expecting to get your leverage back to higher levels as you continue a steady capital return program at the low point in the cycle? Or does the fact that you've remained in the 5% or less type of range for almost two years now maybe mean that you could get a little more aggressive on returning capital and go a little higher on the leverage side? Sure, I'm happy to take that. So look, what we're doing with our capital structure is pretty purposeful and I think we've been straightforward about that. You know, we obviously operate in an industry that has commodity cycles and it's really important for us and a clear competitive advantage to have an incredibly strong balance sheet to manage through those cycles and to have flexibility. Right. So you see us continuing to focus on, you know, a very strong approach in terms of capital allocation. And first and foremost when we think about capital allocation, we think about making sure we have the firepower to invest in what are great projects with great returns. You know, growing things like the Permian and Guyana, investing in strategic projects in our EMPS business like China One, which will startup next year, as well as continuing to invest in more capacity for things like advanced recycling and building our low carbon solutions business. We then really want to make sure that we keep that balance sheet strong because we want flexibility when inevitably the market gets softer. And then clearly we're looking to reward our shareholders with our success. And you would have seen that this quarter with the 4 cent quarterly dividend raise. And you know, in Darren's comments he mentioned it's the 42nd year in a row that our annual dividends have increased. That puts us in a, you know, quite small group of companies in the s and P500. You know, only 4% of companies have that kind of longevity in terms of annual dividend growth on an ongoing basis. So it's important to us that we're conservative now with that balance sheet to give us all the flexibility that we need through the cycles that we have to manage through. I would add to that, John, I think, you know, as we've talked about it was like every year I've been in the job. For us the definition of disciplined capital spending is only investing in the Things where you have an advantage, where you, where your projects will are robust to down cycles and where they deliver highly advantaged returns. And so that portfolio of investment opportunities we're very keen on prosecuting kind of across the cycles and I think that's what we're always mindful of is ultimately we know there's going to be business cycles, commodity cycles, price cycles, but ultimately the demand for the products that we're trying to produce and the advantage of the projects that we're investing in to produce those products are going to be needed. And so having the constancy of purpose there and being able to continue to invest through the down cycles are really, really critical. And so that's, I think fundamental to how we're thinking about this is we got good projects we need to execute on those projects and if we find additional opportunities as we move forward, we need to invest in those as well. That's going to drive kind of the approach that we take to the rest of the balance sheet and our capital allocation priorities. Thank you. Thank you. The next question is from Betty Jang of Barclays. Good morning. Thank you for taking my question. I want to ask about the Permian efficiencies and trends in general. I know we will get a lot more in December, but if we could get some early flavor on what you're seeing in the fields, specifically these 3.5 to 4 mile laterals seems really interesting. And is that part of the synergies that you have identified with Pioneer initially? Sure. I'll start Betty and I'll let Kathy add some perspective as well. I would say just at a very high level, we could not be more thrilled by what we're finding with respect to bringing the two organizations together and the opportunity that's in front of us. I think we certainly saw a big opportunity for ExxonMobil to bring some of its strengths to the Pioneer acreage and the work that they were doing. We anticipated the reverse happening where the organization Pioneer could bring a lot to what ExxonMobil was doing, but frankly very hard for us to estimate that prior to closing the acquisition and getting together and working together. I think what we're finding through that process is there's a real big opportunity to bring a lot of what Pioneer is doing into our operations. Just a couple of examples. You know, they've got a world class water infrastructure network that we're now leveraging to serve the combined assets at a much lower cost. They've got a remote logistic operations center to help on their supply chain and we're taking full advantage of that. We just achieved an all time pioneer record for drilling performance in terms of lateral feet drilled per day. We're leveraging the cube design that we had and applying it to good effect in the pioneer acreage. We're harmonizing a lot of the specifications that we have on materials and services to try to take advantage of the scale and to simplify the procurement supply chain and drive cost efficiencies. And then I would just say as everyone talks about, there's a lot of art to this. Drilling and completions, improvements and getting the best thinking of both organizations and actually in combination developing thoughts and approaches that neither organization came up with independently I think is all manifesting itself in additional synergies. And we're bringing those synergies to the bottom line faster than we had anticipated and they're larger than we had anticipated. So it's a really, I think, good news story and one that we're going to spend quite a bit of time talking to you about on December 11th. And I know Neil and his team are real keen to share some more of the specifics to help kind of take what has been some high level indication of value and translate that down into a lot more detail so that all of you can get a much better feel in terms of what's happening there. Anything else to add, Kathy? No. I mean we initially talked about an average of 2 billion in synergies over the next decade. Obviously that would start smaller and build and we're clearly seeing more synergies than we initially anticipated. And as Darren said, Neal will definitely enjoy the opportunity in December to give an update on that and quantify it. More specifically, I would just say that the focus of that team is NPV and maximizing nvp. I think the, the drive, like we've always said, it's not a volumes game here, it's a value game here. And the great news is we're seeing a lot of value. The next question is from Bob Brackett of Bernstein Research. Good morning. I'd like to talk a little bit about Proxima rebar and your comments around the addressable market. If I think about steel, steel is almost 2 billion tons a year. Half is construction and infrastructure. Ish. Rebar, it's four or five hundred bucks a ton. And so the rebar market is something like say a 400ish billion dollar market. You're talking about 30 billion. How do you think it's almost heart back to value versus volume. When you think about putting this product, which again as you said, is lighter and stronger into the market. Do you go for value and pricing, or do you go for market share? And is the 30 billion reflecting that, or is that just a preliminary sort of estimate? Thanks, Bob. Thanks for the question. I think so I would say we're going to have targeted areas of rebar applications that we'll look at for Proxima. So it's not. We're not trying to address the entire market for rebar, but. But for the rebar markets where we think the value in use for what we're doing is strongest and therefore generates the most opportunity for earnings growth. So it's a segment of the rebar market that we're starting with, recognizing that we're pretty early into it. I think what we're finding, though, through that infrastructure market is, as we said at the beginning, when we're looking for opportunities, is they've got to be big markets with big value in use. In order for it to be a material effort at some point in the future, it's got to be material with respect to ExxonMobil. And so they've got to be big markets. And so we're focused on that. Rebar actually in the infrastructure market is not the biggest one where we see an opportunity. There's also a lot of advantages just using this thermoset resin as an epoxy. And there are many, many applications into a number of different industrial uses that where there's great, huge value and use from the epoxy and good margins and good growth opportunities. Also a lot of applications in the automotive sector, particularly as you think about EVs and lightweighting, this is an incredibly strong, incredibly versatile product that lends itself to a lot of applications in the automotive industry. And so longer term, we see opportunities there. And so what we've really been focused on at Proxima is making sure that we've got a good understanding of the value in use, that we're working with customers so that they can see the demonstrated value in use and make sure that we're testing out the value proposition. We've challenged the organization to put together a very aggressive plan in terms of growing Proxima and then have established what I would say are milestones in our development of that to continue to assess. Are we seeing this potential being realized and therefore earning our way to the continued emphasis on the growth and investment? In these early days, things look really, really positive. But this is a new to the world technology, new to the world processes that we're building into. The plan process and as you can tell from the way we're talking about this, we see huge opportunity here. It's very, very consistent with kind of the history we have in our historical chemical business in terms of taking molecules, developing unique applications with unique performance parameters and then selling those into large market applications. And this fits right into our wheelhouse with respect to that. So it's early days. Rebar is one of the first out the gate. But I would say there's a lot more to come in this space and feeling really, really excited about this opportunity. Interesting. Thank you. You bet. Thank you. The next question is from Jean Ann. Salisbury of Bank of America. Good morning. With China One startup drawing closer, what is your view on the medium term asia chemicals market? China 1 does mostly high performance chemicals. Do we need to see a return all the way to mid cycle chems margins for that project to meet your projections? Yeah, I'll start with that and then hand it over to Kathy to comment on it. But I would say when we went into the China One project we recognized, I'd say the macro challenges with the chemical industry, particularly in China. And so one of the things that underpinned that investment and the thinking behind it was making sure that as you point out, that it's going to be high performance but also low cost and therefore competitive in bottom of cycle conditions and generating returns and making money in tough environments. And so we kind of went into that with our eyes wide open and actually as we've progressed the project feel really good about where we've ended up with the project. So my expectation is it'll be a valuable part of the portfolio even as the market remains challenged. And that challenge will exist for some. We continue to see good demand growth, but there's just a lot of supply that the industry has to work through. And it will take time for the rationalizations to occur. But we'll be in a good position as we've demonstrated to date that our portfolio is built for these tough conditions. And therefore our view is once the market clears, we'll see a lot more upside than we've experienced here over the last couple couple of years. Anything to add, Kathy? Yeah, the only thing I'd add is, you know, for us, China is going to be one of the biggest drivers of chem growth longer term. Right. As they continue to have their population kind of moving up to the middle class. And longer term chem growth is usually a bit above gdp. And so the fact that we were able to strategically place this big project in China moves us from what was 100% importation model to now having our own production there on the ground. That's very low cost. So we would expect even though Asia continues to be in bottom of cycle conditions because of the low cost of this facility, we should get to positive cash results reasonably quickly and it will be a very resilient asset for us long term. Great, thank you. Thank you Jan. The next question comes from Biraj Borkhotarye of Banks America. I apologize. Rbc. Hi there, it's Bhiraj from rbc. Just wanted to ask around some recent reports in September that you were withdrawing from a farm down process in Namibia. Is there anything you can say about what you saw there that was not of interest? Obviously there seems to be a lot of resources covered there, but varying views on commerciality of the reservoirs. So any thoughts there would be appreciated as well as how you're thinking more broadly about, you know, bringing inorganic opportunities into what already feels like quite a full upstream hopper. Thank you. Yeah, sure. Thanks for the question. Bharaj. I would just say maybe a little more generally than the specific question on what we're seeing. We tend one of the changes that we've made in the organization is through this value chain concept is making sure that as we're evaluating resources and potential resources and discoveries that we are thinking about the whole end to end process and making sure there's a commercial and economic opportunity set there that justifies the investment. So we know it is an integrated approach to make sure that as we are doing the work to understand the resources and what would be required to develop resources that at the same time we're looking at in the context of the cost of developing those resources and then the economics of that cost and the returns that we could generate and how even the quality of the resource to make sure that it would be competitive on the market. So all that now today is built into the early decision making and at the same time the size of the opportunity has to be large enough to give us the scale advantages. So a big difference to how we think about opportunities today versus maybe 10 years ago is if it doesn't work across that entire value chain, we don't see the full value proposition, then we're not going to be interested in it. So I would say that's just generally the macro approach. Without addressing specifically any one particular area, which I want to refrain from doing. I think then to the second part of your question with respect to inorganic opportunities. I would say we all know this is a a depletion business and so I Don't think you can sit at any point in time and get comfortable, that you don't need to be doing anything at some point for the future because of the recognition that every barrel you produce is a barrel that's gone. And you've got to keep thinking and have in your mind that you're on this treadmill and finding new opportunities as you go. And so I would say the organization is very active across what are the three key levers for making sure that we keep a very full portfolio of production opportunities, which is continuing to focus on technology and making sure for the things that we have today, we're maximizing the recovery of those things, continuing to look for new resources through the exploration lens and finding opportunities in that space, organic opportunities and then the inorganic opportunities, looking for opportunities, opportunities where we can bring a value proposition to enhance what somebody else is already doing in this space. And I'd come back to the formula that we've always talked about, which is anything that is inorganic that we're going to acquire, we have to bring and we have to see an ability to offer some unique value. So the 1 +1 =3 has to be part of the equation. And if we can't convince ourselves that that proposition is there, it's difficult to justify making the investments. And so that's a high hurdle to clear. And so it's one where we got to work real hard and continue to look for the opportunities where that opportunity is available. And I would say the emphasis that we're putting on the technology side of the equation helps with that, which is what we saw with the Pioneer acquisition as we drive the technology to improve what we're getting out of our base business that lends itself to opening up deal space on acquisition opportunities. That's how we think about it. The next question is from Ryan Todd of Piper Sandler. Thanks. Maybe if I could ask one. As we think about, maybe this is front running, but as we think about capex into 2025. Is the post Pioneer. Kind of normalized run rate on quarterly. Or annualized capex the right way to think about a starting point for next year? Or are there any material moving pieces, whether it's incremental project timing or maybe even more specifically potential for cost deflation and efficiency gains in the lower 48 part of the upstream that could push. Capex in one direction or the other? Yeah, I'll start and then I'll let Cathy fill in a lot of the details. I would just, I think the one thing which you'll hear on December 11th is what Neil and the team did is, you know, it's not, this is not a bolt on where we're kind of adding what the two organizations were doing and then going forward with that. This was kind of going back to the fundamentals, clean sheets of paper and developing up what we view as the optimum development plan across that portfolio. And so the optimization of our efforts across the broad portfolio means that the plan going forward is different than what the individual plans of Both Pioneer and ExxonMobil were prior to the acquisition. Acquisition. And so it's a new mix, it's a new development plan that we'll share a level of detail on December 11th. And again, what I would tell you is it's really looking at what do we see as the capability of the organization, the value, opportunity and our ability to deliver on that. That's going to set the CAPEX plans. But I'll let Kathy provide some additional. Yeah, otherwise I would have said, look, the starting point was look at pioneers, you know, S4 as the starting point. You know, they would have been projecting their own capex, you know, before we put Exxon Mobil and Pioneer together at I'll call it beginning at 4.5 billion and sort of building to the $5 billion level over time. So that's a starting point. But you know, we are going to be looking at the Permian holistically and we're going to be putting our collective dollars kind of into an overall production plan and program that we think is going to drive the highest levels of efficiencies and the highest returns, as Darren already mentioned. So the one other thing I just want to take the opportunity to mention is we have been guiding to capex and exploration expense. We had said for this year that's going to be $28 billion. That's what we still think it's going to be. That's 25 billion for ExxonMobil and about 3 billion for Pioneer. We're going to move to Cash Capex for our guidance going forward and we'll talk about that more during the corporate plan. That's a metric that is consistent with what other IOCs kind of guide to. And it will make it easier for you to translate that information kind of into the cash flow that we provide when we report our results. Great. Thank you. Thank you, Ryan. The next question is from Paul Chang of Scotiabank. Thank you. Good morning, Darren. I'm interested. Thank you. I'm interested by your comment about the synaptic graphite. Is this a long term over the. Next 10 years, or that this is like over the next five years become a potentially that a very sizable business for the company. And when I say sizable, I mean what is your capability to ramp up the production volume within the next five years if the market is there to accept it? I mean, trying to understand that how big are we talking about this one and what kind of timeline we're really talking about? So, yeah, thanks, Paul. I think I would talk about Proxima and our carbon materials venture maybe collectively there, because there are two examples of basically looking at our portfolio today, looking for where we saw some advantaged feedstock, where we've got access to low cost feedstock, and then looking at our technology and capability to take that feedstock and build a product that meets an existing need out there with additional advantage and value to customers. And that's kind of the approach we've taken across both of those. I think Proxima, you know, as I said earlier, we challenge the organization for both of those new opportunities to put together an aggressive schedule, what it could look like and how quickly we could ramp it. And those businesses have the potential to get fairly large moving forward in the Next, call it 5 to 10 years and multiple billions of dollars. That's the potential that we see in terms of our ability to ramp up production and sell into that marketplace, assuming that the technology scales up and commercializes successfully and that we get the kind of customer acceptance that we're looking for. So that's, I think aggressively we could make that happen. And we've set ourselves kind of a plan that allows us to achieve that. But recognizing these are new products, new technologies, just beginning to scale these things. We've got a number of steps as we move towards that broader ambition to demonstrate to ourselves that it will be successful because we're not going to rush in and spend a lot of money until we convince ourselves that what we're seeing today at a much smaller scale, we're seeing as we ramp this up and implement these technologies. So the plan today has investments that grow both of those businesses in the early stage to demonstrate the value proposition that we believe is there. And assuming as we go through the next few years that we see what we expect to see there, then we will ramp up the spending and build those into the plans to build on the early successes that we're seeing. So you kind of think of it as milestones along what could be a very rapid growth plan. But we're not locking in the rapid growth or locking in the capital investments until we Demonstrated the success that we believe is going to be there. Yeah. The only other thing that I'd add to that and something our EMPS business is really good at, you know, we have to qualify all these new products for their end user in any company. Right. And that takes a lot of time and effort on our part. Again, it's something that our EMPS business is quite skilled at doing. We do that today as we bring new products to market. But that also creates, as you do that, a bit higher kind of barriers to entry. Right. And again, that's something we bring a lot of skill to. So, you know, while it will take us time to build these different ventures up and the product qualifications for different applications, as we do that, we'll build growth and momentum and it'll be hard for others to come in. Very good. Thank you. Thank you, Paul. The next question is from Jason Gableman of Cowan. Morning. Thanks for taking my question. I wanted to ask about the advantaged. Asset earnings in the quarter which were. Lower quarter over quarter and I'm just trying to understand the underlying drivers of that decline. If I think about it, Guyana Production was down 30,000 barrels a day. Oil production from Pioneer maybe added 100,000 barrels of oil. So it kind of implies that the Guyana earnings per unit are about three times what you're getting from the Pioneer assets. And I wonder if that math is reasonable or there were other factors that were contributing to that advantage. Asset volume, earnings, impact on the quarter. Thanks. So the biggest thing that impacted that, as you already mentioned, was the tie ins for Lisa 1 and 2 to the gas to energy project and that that impacted our Guyana overall volume. And so that impact was only partially offset by getting the additional month of Pioneer kind of volumes on the other side of that. So those were the two biggest movers. If you take a step back from that though, and look at where we're at on a year to date basis, I mean you really see the power of the Pioneer acquisition and Guyana volumes increasing year over year. So on a year to date basis, our advantage, volume growth and up gave us almost $3 billion of incremental earnings. And that's the engine, you know, that we're counting on long term. Okay. Was there anything that was unique to Pioneer contribution in the quarter that would have depressed it versus where it was last quarter? Nothing unique. I mean, Pioneer's overall contribution in the quarter, just in terms of the volumes they produced were, I would have said, pretty steady. I mean down marginally quarter over quarter. But again, we only took 2 months of the quarter from last quarter relative to 3 months this quarter and in any quarter in the Permian, we're seeing growth obviously year on year, but on quarter to quarter those results might look a little bit different. But we're really pleased overall with what we're seeing in production. I mean, we had a third quarter production record in the Permian of over 1.4 million oil equivalent barrels. So, you know, both the ExxonMobil operation and the Pioneer operation in the Permian is going really well. And obviously Darren talked a lot about the efficiencies that we're seeing as we move to the, I'd say deeper technology that ExxonMobil is bringing in its cube development and getting the best of both, both in terms of drilling and in terms of completion experience from both companies. And applying that across all the acreage. In the Permian, I'd just add on the earnings basis with the step up, you've seen increased depreciation with bringing Pioneer into the portfolio. Yeah, the last thing is, I'd say if you looked at Pioneer on a cash flow basis, we're already cash flow accretive, which is what we expected. And obviously that neutralizes for the incremental depreciation that we took on through the purchase accounting last quarter. Okay, great. Thanks for the answers. We have time for one more question. Our final question will be from Roger. Reed from Wells Fargo. Yeah, good morning. Thanks for sending me in here. To stay away from the December questions, let me throw one at you here. On the overall op cost savings, the 15 billion total by 27, you know, obviously about three quarters of that's in. I was just curious. You mentioned earlier, Darren, you know, a technology company, is any part of that cost savings up to the 15 related. To any sort of an AI effort. Internally, or is it strictly the logistics. As you've talked before? And if so, is there something beyond the 15 billion as you think about. Kind of a technology change over time? Yeah, thanks, Roger. I'll start with the end of your question, which is my expectation is there's more to come in this space and I'll talk to AI more specifically, but I would just context it more broadly in that if you look at the transformational change that we've been making across the entire enterprise, we're very early into that process. We just, you know, this year, the plan that we're developing that we'll talk to you about on December 11, you know, the new organizations that we put in place, the gbs, the supply chain, even the trading organization, those are just they were kind of the first had some time to run and develop a full blown plan this year. And so with a lot more experience under the belt and we continue to see a lot of opportunity out there that will take us time to capture. And so I would see that there's going to be a continuum there and continued progress that we're going to make based on the centralized approach and the organization getting more and more efficient, but more importantly more effective at executing on the core task of driving value in the company. So my view is that we're going to deliver on the 15 and then as we look going forward, there'll be more to come as that organization continues to become more effective and more efficient. The technology side of the equation I think is another area that, that will take longer to manifest itself. But I have a lot of optimism that the work that they're doing will ultimately drive not only I'd say the revenue side of the equation and basically higher value on that side, but also drive cost down. And so we'll get kind of that double effect of higher revenues and lower cost to improve profitability. There's a good portfolio of things that, that organizations working on. And because we've now centralized that and organized ourselves our own capabilities, we can now take the best capabilities and put them to the hardest problems, the most valuable problems, which I think are going to end up delivering a lot of good value. And AI is part of the equation. So there is a concerted effort to make sure that we're really working hard to apply that new technology to the opportunity set within the company to drive effectiveness and efficiency. So that's certainly part of it. Like everything that we're doing, it's a thoughtful approach. It's one where we're going to make sure that we can get the value that we anticipate. We don't like jumping on bandwagons and kind of talking in aspirational terms, but I would tell you we do see a good potential there, particularly in a lot of the data rich areas of data. The business and the team's working on how best to take advantage of AI as a tool to help drive value there. And I'd certainly say if I take one step up from AI and just talk about technology more broadly and especially information technology, that's a space where we continue to have a lot of opportunity. We grew up with very siloed businesses which resulted in our processes not being very standardized or conforming across the company. That made it more difficult, I'd say, to apply single type technology applications across the company. But that's something that we're getting at today. And so we'll be continuing to automate much of what we do today manually. And that's going to drive importantly improved effectiveness as well as improved efficiency and a way better expense experience for our people and our customers and our vendors because we're not always the easiest company to do business with when it comes to information technology and self service and those types of things. So that has a big role to play as we look forward. We have a pretty complicated kind of IT environment as we sit today and we're in the process of simplifying that which is going to drive a much higher degree of automation into the business and give us importantly, way better and more timely information that will be used to make faster, better business decisions to drive better results kind of in the business more generally. All right, thanks, Roger, and thanks everybody for joining the call and for the questions. We will. As usual, we're going to post the transcript of this call to the investors section of our website early next week. But before we wrap up, I want to again remind everyone we mentioned it a few times this morning of our Corporate Plan Update and Upstream Spotlight, which. Will be held next month, December 11th. And we will look forward to connecting with everyone again then. So with that, have a good weekend. And I'll turn it back to the operator. To conclude, this concludes today's call. We thank everyone again for their participation.",
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          "text": "The first question comes from Devin McDermott of Morgan Stanley.",
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          "text": "Hey, good morning. Thanks for taking my question. So Darren, you had some helpful prepared remarks on the downstream business, so I actually wanted to start there. If we look at results in the quarter quarter they were strong and actually looks like they came in a bit ahead of what was implied by the 8k earnings considerations. Even with that Joliet impact you discussed and softening crack spreads in the quarter, and it looks like margin capture, volume costs were all factors here, I was wondering if you could just talk through some of the latest market trends you're seeing across your refining footprint, the drivers of that beat versus the earnings considerations, and then specifically how some of the strategic projects are impacting results relative to your expectations. Yes, sure, Devin, I'll start with that and then see if Kathy wants to add anything. I think you've got to kind of step back to the broader approach that we've established with the downstream business. And its integration into the new company of product solutions. Which is really looking at how you optimize the full value chain. That, I think is a fundamentally different approach to how we were historically running a refining business. And looking at all the value levers to pull. From bringing crude in to the refineries, all the way out to marketing the products. And I think the results that we see in that business Are reflective of a collection of those efforts across the whole. In addition to a lot of the cost cutting that we've been doing to reduce structural cost. And the effectiveness and improvements that we're seeing. By centralizing a lot of activities. And bringing the best thinking of the corporation to bear on each part of the business that we're operating. A great example in the refining business has been the centralization of the maintenance approach that we're doing. Not just in turnarounds, but in our routine day to day maintenance. That has brought a huge amount of value and lower cost to our refineries operating around the globe. By taking the best thinking across both our upstream and downstream and chemical businesses, Consolidating that into a single approach. And then effectively executing that at each of the sites. Is driving huge, huge value. I think too, eliminating what was somewhat of an artificial barrier. Between our chemical businesses in the facility and our refining business in the facility. And making sure that the organization thinks about the whole and optimizes the whole. And the disposition of each stream as it flows through those facilities is having a big impact. I would say the optimization of the facility and the molecules that flow to those facilities. Irrespective of whether it's a product that goes into the petroleum product space. Or whether it goes into the chemical product space, I think has been a significant uplift. And then on top of that, I would say the thinking about the channels to market and the value uplift, we can get through those channels. And bringing a trading organization along and thinking about them as a value channel to optimize across the value chain that our refineries participate. Is also bringing additional value and making sure that we're maximizing the value in the placement value of all the barrels that come out of the refinery and all the products that come out of the refinery. So there's a collection of things that have been changed over the years. That are fundamentally different than how we've historically been running the business. And obviously some of those and the benefits of those will move with the market environment and the available spreads in the market. But generally speaking, it's a combination of a lot of things that we've been working on to drive value in that business along with the others. Kathy, anything to add?",
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          "text": "Hi there, it's Bhiraj from rbc. Just wanted to ask around some recent reports in September that you were withdrawing from a farm down process in Namibia. Is there anything you can say about what you saw there that was not of interest? Obviously there seems to be a lot of resources covered there, but varying views on commerciality of the reservoirs. So any thoughts there would be appreciated as well as how you're thinking more broadly about, you know, bringing inorganic opportunities into what already feels like quite a full upstream hopper. Thank you. Yeah, sure. Thanks for the question. Bharaj. I would just say maybe a little more generally than the specific question on what we're seeing. We tend one of the changes that we've made in the organization is through this value chain concept is making sure that as we're evaluating resources and potential resources and discoveries that we are thinking about the whole end to end process and making sure there's a commercial and economic opportunity set there that justifies the investment. So we know it is an integrated approach to make sure that as we are doing the work to understand the resources and what would be required to develop resources that at the same time we're looking at in the context of the cost of developing those resources and then the economics of that cost and the returns that we could generate and how even the quality of the resource to make sure that it would be competitive on the market. So all that now today is built into the early decision making and at the same time the size of the opportunity has to be large enough to give us the scale advantages. So a big difference to how we think about opportunities today versus maybe 10 years ago is if it doesn't work across that entire value chain, we don't see the full value proposition, then we're not going to be interested in it. So I would say that's just generally the macro approach. Without addressing specifically any one particular area, which I want to refrain from doing. I think then to the second part of your question with respect to inorganic opportunities. I would say we all know this is a a depletion business and so I Don't think you can sit at any point in time and get comfortable, that you don't need to be doing anything at some point for the future because of the recognition that every barrel you produce is a barrel that's gone. And you've got to keep thinking and have in your mind that you're on this treadmill and finding new opportunities as you go. And so I would say the organization is very active across what are the three key levers for making sure that we keep a very full portfolio of production opportunities, which is continuing to focus on technology and making sure for the things that we have today, we're maximizing the recovery of those things, continuing to look for new resources through the exploration lens and finding opportunities in that space, organic opportunities and then the inorganic opportunities, looking for opportunities, opportunities where we can bring a value proposition to enhance what somebody else is already doing in this space. And I'd come back to the formula that we've always talked about, which is anything that is inorganic that we're going to acquire, we have to bring and we have to see an ability to offer some unique value. So the 1 +1 =3 has to be part of the equation. And if we can't convince ourselves that that proposition is there, it's difficult to justify making the investments. And so that's a high hurdle to clear. And so it's one where we got to work real hard and continue to look for the opportunities where that opportunity is available. And I would say the emphasis that we're putting on the technology side of the equation helps with that, which is what we saw with the Pioneer acquisition as we drive the technology to improve what we're getting out of our base business that lends itself to opening up deal space on acquisition opportunities. That's how we think about it.",
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          "text": "The next question is from Ryan Todd of Piper Sandler.",
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          "text": "Thanks. Maybe if I could ask one.",
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          "text": "As we think about, maybe this is front running, but as we think about capex into 2025.",
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          "text": "Is the post Pioneer.",
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          "text": "Capex in one direction or the other?",
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          "text": "We thank everyone again for their participation.",
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          "text": "And I'll turn it back to the operator.",
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          "text": "To conclude, this concludes today's call.",
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          "text": "Good morning everyone.",
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          "text": "Welcome to ExxonMobil's third quarter 2024 earnings call. Today's call is being recorded. We appreciate your joining us today. I'm Jim Chapman, Vice President Treasurer and Investor Relations. I'm joined by Darren Woods, Chairman and CEO and Kathy Michaels, Senior Vice President and cfo. This quarter's presentation and prerecorded remarks are available on the Investors section of our website. They're meant to accompany the third quarter earnings news release which is posted in the same location. During today's presentation we'll make forward looking comments including discussion of our long term plans and integration efforts which are still being developed and which are subject to risks and uncertainties. Please read our cautionary statement on slide 2. You can find more information on the risks and uncertainties that apply to any forward looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides which are also posted on the website. And now I'll turn it over to Darren for some opening remarks. Good morning and thanks for joining us. ExxonMobil announced earnings of $8.6 billion this morning, one of our best third quarters in the past decade. Even more importantly, this quarter's results continue to demonstrate our enterprise wide transformation is improving the earnings power of the company. Our energy products business provides a compelling proof point. In 2024 year to date, earnings are roughly double what they were in the same period of 2019. On a constant margin basis for all of our businesses we've been focused on reduced cost, high return investments and selected investments to improve profitability, particularly in bottom of cycle conditions. This work has fundamentally transformed our refining business. For instance, we've high graded our portfolio by divesting less advantaged sites. At the time of the Exxon and Mobile merger, we had 45 refineries. In 2017 when I stepped into this job we had 22. I expect to end this year with 15, bringing us very close to an entire portfolio advantaged by location and configuration. We've also significantly improved our product yield by investing in assets such as the Rotterdam Advanced Hydro Cracker and the Bullmine expansion. We've increased the yield of higher value products from lower value feeds. Finally, we've achieved dramatic structural cost savings in our overall product solutions business. We reduced costs by $5 billion versus 2019 in energy products specifically. To take one example, we completed our first half 2024 turnarounds for 200 million dol million less than the previous turnarounds on these assets, a 24% reduction. Our results from the quarter also demonstrate the value of diversification by geography, resource and product mix, providing natural hedges that increase the stability of earnings. In the third quarter, while liquid prices and refining margins were down, gas realizations, chemical margins and specialty margins were all up. Underpinning our results is a relentless focus on execution excellence. We saw a good example of this in the quarter at our Joliet refinery in Illinois. In July, a tornado ripped through the site, cutting power, steam, instrument air and potable water. We've never had a harder shutdown, with extensive damage to the transmission system that provides power to the site. We were cold for almost two weeks. This was an unprecedented event that severely impacted fuel supplies for the entire region. Our community, the City of Chicago, local, state and federal governments were all counting on a quick recovery. I'm proud to say that the men and women of Joliet, with a lot of support from across the corporation, delivered. Thanks to their remarkable efforts, we beat an aggressive recovery schedule. And we're supplying much needed fuel to the market far faster than we thought possible, reducing the time to recover by a third. I want to take this opportunity on behalf of all their colleagues at ExxonMobil and the communities that depend on them, to thank everyone involved in the recovery for their hard work, commitment and personal sacrifice. Thank you. You did us proud. As always, our success is our shareholder's success. This morning, we announced a 4% increase to the quarterly dividend to 99 cents per share. We've now increased our annual dividend for 42 years in a row, putting us in an elite tier of the companies known as dividend aristocrats. Less than 4% of S&P 500 companies have paid higher dividends every year for more than 40 years. We've also sustained our position in the top five of all S&P 500 companies with the largest dividends paid. We know how important the dividend is to our investors. Particularly our millions of retail shareholders remain committed to a sustainable, competitive and growing dividend, which is a key component of the attractive total shareholder return we are delivering. In the first nine months of 2024, we've generated a TSR of 20%, leading all IOCs, just as we've done over the last three, five and 10 years. Turning to our upstream business, the portfolio of advantage assets we've built is the envy of the industry. In the third quarter, we grew production to 4.6 million oil equivalent barrels per day, a 24% increase versus the prior year quarter. To drive higher value, we continue to improve the profitability of the barrels we produce. Our progress has been exceptional on a constant price basis. Our 2019 unit earnings were about $5 per oil equivalent barrel year to date. In 2024, excluding Pioneer, we've doubled that to $10 per barrel. The third quarter was our first full quarter with Pioneer which added 770,000 oil equivalent barrels per day of highly advantaged production. As we said when we announced the deal, combining our technology Pioneers contiguous acreage and the capabilities of our two organizations is allowing us to recover more resource more efficiently with a lower environmental footprint. In the third quarter we drilled the longest ever laterals on pioneer acreage at 18,350ft or nearly three and a half miles. We're scheduled to spud the first ever 20,000 foot laterals on Pioneers acreage this quarter. The benefits of long laterals are significant fewer wells, a smaller surface footprint and greater capital efficiency. In Guyana, we completed tie ins for the country's Gas to Energy project on budget and schedule and we are back to full production once the government completes the associated power plant. The Gas to Energy project is expected to provide the people of Guyana with electricity that is significantly cheaper, cleaner and more reliable. This will further spur the Guyanese economy which was the fastest growing in the world in the first half of 2024 with GDP up 50%. Our Payara project, which remained online during the tie ins, continues to perform above investment basis. As has been the case with all the projects we've brought online in the world's premier deep water development, we'll have much more to say about the upstream business during our spotlight next month. I promised Neil I wouldn't steal his thunder, so let me just say on the Pioneer synergies alone, which are considerably higher than expected, we think you'll find the story compelling. As I've said many times, we're a technology company managing and transforming molecules to provide products that meet society's greatest needs and deliver attractive returns in our low carbon solutions business. We continue to lay the groundwork for the world's largest low carbon hydrogen production facility at our integrated site in Baytown. The facility represents a new energy value chain and will produce 1 billion cubic feet per day of virtually carbon free hydrogen with 98% of the CO2 emissions captured and stored in the third quarter. Two new partners joined the project to accelerate market development for this new energy value chain. ADNOC has taken a 35% equity stake in the facility. We're pleased to add their proven experience and global market insights to this world scale project. In addition, Mitsubishi signed an agreement for the potential offtake of low carbon ammonia and equity participation in the project. The ammonia will be used to generate power and heat for industrial applications in Japan, helping to establish a new supply chain for low carbon energy. The agreement with Mitsubishi follows a similar agreement earlier this year with Jarrah, Japan's largest power generator. While we still have some hurdles to clear, we're encouraged by the growing market recognition of the significant value and advantages of this first in the world low carbon project. Of course, the highest hurdle, as we've said, is the translation of the IRA's technology agnostic legislation into enabling regulations that maintain focus on the what carbon intensity and not the how. We are ready to move forward once the Biden Administration publishes regulations consistent with the legislative intent. Assuming this happens, we plan to reach FID in 2025 with startup in 2029. We've also made noteworthy progress on the CCS front. In October, we announced an agreement with our first natural gas processing customer to Transport and store 1.2 million metric tons of CO2 per year. This is our fifth agreement overall and brings our total CO2 contracted for storage to 6.7 million metric tons per year, more than any other company. In addition, we secured the largest offshore CO2 storage site in the United States through an agreement with the Texas General land office. The 271,000 acre site further solidifies the US Gulf coast as a leading market for carbon capture, transport and storage. In addition to lcs, we're advancing other technology driven businesses that have huge potential. We've spoken before about our Proxima thermoset resin, which is a revolutionary new material that is stronger, lighter and more corrosion resistant than conventional alternatives. We see a total addressable market in this space of 5 million tons per year and $30 billion by 2030. One major application of Proxima is rebar that is only 1/4 the weight but twice as strong as steel. In the third quarter, we signed a licensing agreement with Novocus Corporation, a North American manufacturer of rebar from Proxima that allows rebar to be produced anywhere in the world. Rebar is just one example of Proxima's value in use. Others include high performance coatings and a range of lightweighting applications for automobiles. In our carbon materials venture, we see a massive opportunity in the market for battery anode materials which could grow at 25% per year and like Proxima, reach $30 billion by 2030. The primary material in battery anodes is graphite and we've developed proprietary technology that allows us to produce feedstock for next generation Graphite at scale, this innovative material has the potential to improve EV battery range by 30% and enable faster charging. ExxonMobil's history with transportation dates to the very beginning of the automotive age when we provided fuel for Henry Ford's first automobiles. Some might find it ironic, but with the work we're doing in lithium for cathodes, graphite for anodes, proxima as a lightweight battery case, and the plastics, lubricants and cooling fluids we already provide, we may become one of the most important players in a new automotive age of EVs. At our corporate plan update next month, we'll highlight how we're investing in technology based high return growth opportunities across all of our businesses. From the upstream to product solutions to LCs to new growth areas. What I would leave you with today is this. All our success are continuously improving profitability, our execution excellence, our technological innovation and our tremendous portfolio of growth opportunities flows from our strategy and focus on fully leveraging our core capabilities and competitive advantages. The most important being our people. We have the best team in this industry and in my view, any industry. I look forward to sharing more of their work during the corporate plan update. Thank you. Thank you, Darren. Now let's move to our Q and A session and as a reminder, we ask each participant to keep it to just one question and with that operator, we'll ask you to please open the line for the first question.",
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          "text": "Thank you.",
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          "text": "The question and answer session will be conducted electronically.",
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          "text": "If you'd like to ask a question.",
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          "text": "Key followed by the digit 1 on your telephone.",
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          "text": "Kind of normalized run rate on quarterly.",
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          "text": "Or annualized capex the right way to think about a starting point for next year? Or are there any material moving pieces, whether it's incremental project timing or maybe even more specifically potential for cost deflation and efficiency gains in the lower 48 part of the upstream that could push.",
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          "text": "Yeah, I'll start and then I'll let Cathy fill in a lot of the details. I would just, I think the one thing which you'll hear on December 11th is what Neil and the team did is, you know, it's not, this is not a bolt on where we're kind of adding what the two organizations were doing and then going forward with that. This was kind of going back to the fundamentals, clean sheets of paper and developing up what we view as the optimum development plan across that portfolio. And so the optimization of our efforts across the broad portfolio means that the plan going forward is different than what the individual plans of Both Pioneer and ExxonMobil were prior to the acquisition. Acquisition. And so it's a new mix, it's a new development plan that we'll share a level of detail on December 11th. And again, what I would tell you is it's really looking at what do we see as the capability of the organization, the value, opportunity and our ability to deliver on that. That's going to set the CAPEX plans. But I'll let Kathy provide some additional.",
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          "text": "You know, the only thing that I'd add is we try pretty hard to demonstrate in the materials we provide you with earnings, the underlying big movers that are improving, you know, the earnings power of the company. And so in this case, I'd say we put forward the year to date results more so than just the quarter because that's a bit easier then to see that coming through our results. So if you look at our energy product business on a year to date basis, you'll see that we got about a half a billion dollar uplift from advantaged project growth as well as cost savings. Right. And so that's coming from both the Beaumont expansion as well as Permian Crude Ventures and all the structural cost savings that we're driving, not just through the energy products business, but obviously more broadly for the company. And then early on in the question you referenced, we came in a bit better than what the street was expecting in this area. One of the reasons we came in better was the much faster startup at Joliet. And so we had given some guidance on what we thought that impact was going to be. And the team just did a wonderful job in restarting that facility safely and more quickly than we had expected. And that also really accrued to our bottom line.",
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          "text": "Great.",
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          "text": "Appreciate the detailed response. Thanks. Thank you, David. The next question is from Neil Mehta of Goldman Sachs. Yeah, good morning, Darren. Kathy and team just wanted to spend some time talking about the startups of the key LNG projects and maybe you could talk about where we stand in.",
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          "text": "Terms of de risking Golden Pass and.",
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          "text": "Bringing that into service. And then we get less visibility on what's happening in Qatar.",
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          "text": "But it's going to be a big.",
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          "text": "Important project, Northfield expansion. So to the extent you're able to, can you just share your perspective of.",
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          "text": "How that's going on the ground?",
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          "text": "Yeah. Good morning, Neil. Thanks for the question. I'll just say, obviously the Golden Path venture is managing the project and we're contributing as best we can and obviously worked with the venture in response to the bankruptcy. That team, I think is making really good progress at reoptimizing the work and the schedule. We anticipate today that that venture will basically be delayed by about six months. So we expect to see first LNG out of that train back end of 2025 potentially slipping over into the new year, but it'll be in that time frame that we see. And then of course, each train after that we anticipate about six months separation between the trains coming on. So I think that venture has done a lot of really good work to overcome what was a pretty challenging set of circumstances and we feel pretty good about the path that they're on. There's still more work to do, but I think a really good vector and the fact that the existing contractors that were involved in that venture have stepped in to fill the void and pick up the baton and keep running the race, I think is a huge testament to those and their commitment to the success of this project, along with all the folks at the venture who are working this real hard. So we stay close to it. But the venture organization there really owns that and deserves the credit for the recovery there. I think on Qatar, same thing, we're a participant in there and Qatar Energy obviously is managing those projects, but better place for them to give the status of where the projects are. We feel pretty good about the collaboration and our ability to work hand in glove with Cutter Energy and frankly feel really good about the competitiveness of those projects and so are fairly engaged with those and I think feel good about the work that's happening in that space. And then obviously we're doing work in Papua and looking to make sure we can come up with an attractive project there and looking at opportunities to advance the Mozambique project as well. So we've got a pretty good portfolio of LNG projects that we see going into the future and the market response that we're seeing on those, the potential for those projects is very positive. So we see strong demand signals and frankly a lot of customer interest. So I feel good about the LNG business as a whole and then I think working really constructively through the the projects that are in development or in construction and then making good progress on the concepts and the engineering for the LNG projects to come. Thanks, Darren. Thank you, Neil.",
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          "text": "The next question is from Doug Leggett of Wolff Research.",
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          "text": "Hey, good morning everyone. Thanks for having me on. Gosh, Darren, I'm trying hard not to get in front of December, but I would love to ask you a question on Guyana production capacity, or rather production versus production capacity. And I guess my question goes like this. Alistair, I guess has been quoted recently about the next wave of debottlenecking at Payara. A recent field trip that we hosted with you guys down there led us to understand that you haven't even drilled all the development wells on the early phases like Lisa one. And then lastly you've now got Hammerhead coming in on a converted FTSO which typically seems to be a little quicker than the greenfield. So I guess my question is how do you reconcile production versus production capacity? Which I guess is how you've always kind of tried to manage expectations on the outlook for Guyana. Yeah, I think there's a lot of, as you know, having spent some time down there, Doug, a lot of variables at play. And oftentimes those investments that we make are coming in or coming on stream at the back end of the year. And so part of the capacity versus production is just the timing of when we bring those projects on. Then obviously there's the timing of, as we know, all these resources over time deplete. And the organization is working really hard at infill drilling and doing the other things they need to keep capacity utilization high. And so that work and the timing of that and scheduling of that work features into it. So I think a lot of those things go into. We do our best to give all of you a good view of what we expect to be producing versus the capacity. And obviously the organization is working really hard to do an even better job. And everyone, I think that's working that project and as we've demonstrated over the years, is very focused on continuing to operate those facilities in a very environmentally responsible way. We've been very pleased with the low level of flaring that they've managed to achieve. The ability to bring those facilities on really in an outstanding fashion with very low levels of flaring as they start these things up and then continue to run with no routine flaring. And then at the same time really push production to make sure that we're fully utilizing the capital that we put in the ground and doing that very safely. And we continue to surprise ourselves with the ability of those organizations to find ways to fill up that capital. My expectation is they'll continue to do that. Really hard to forecast exactly how successful they are going forward. But we focus on the capacity and then the targets that we're providing you. And we'll give you updates, obviously in our best interest as we sharpen our plans and get a better look at things that we'll bring that forward and share with the rest of you. And I do think when we get into December with the corporate plan review, I know that Neil is anxious to talk about his entire portfolio and the progress that we're making across not only Guyana, but the Permian. So we'll give you some more color commentary then as well.",
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          "text": "Great.",
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          "text": "Thanks so much.",
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          "text": "You bet. Thank you, Doug.",
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          "text": "The next question is from John Royal of JPMorgan. Hi good morning. Thanks for taking my question. So my question's on your balance sheet. The 5% net debt to capital is very impressive and you're continuing to live within your means on the cash flow side even when the cycle is turning down off of peaks. So my question is, do you consider yourselves under levered at the higher point in the cycle and expecting to get your leverage back to higher levels as you continue a steady capital return program at the low point in the cycle? Or does the fact that you've remained in the 5% or less type of range for almost two years now maybe mean that you could get a little more aggressive on returning capital and go a little higher on the leverage side?",
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          "text": "Sure, I'm happy to take that. So look, what we're doing with our capital structure is pretty purposeful and I think we've been straightforward about that. You know, we obviously operate in an industry that has commodity cycles and it's really important for us and a clear competitive advantage to have an incredibly strong balance sheet to manage through those cycles and to have flexibility. Right. So you see us continuing to focus on, you know, a very strong approach in terms of capital allocation. And first and foremost when we think about capital allocation, we think about making sure we have the firepower to invest in what are great projects with great returns. You know, growing things like the Permian and Guyana, investing in strategic projects in our EMPS business like China One, which will startup next year, as well as continuing to invest in more capacity for things like advanced recycling and building our low carbon solutions business. We then really want to make sure that we keep that balance sheet strong because we want flexibility when inevitably the market gets softer. And then clearly we're looking to reward our shareholders with our success. And you would have seen that this quarter with the 4 cent quarterly dividend raise. And you know, in Darren's comments he mentioned it's the 42nd year in a row that our annual dividends have increased. That puts us in a, you know, quite small group of companies in the s and P500. You know, only 4% of companies have that kind of longevity in terms of annual dividend growth on an ongoing basis. So it's important to us that we're conservative now with that balance sheet to give us all the flexibility that we need through the cycles that we have to manage through.",
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          "text": "I would add to that, John, I think, you know, as we've talked about it was like every year I've been in the job. For us the definition of disciplined capital spending is only investing in the Things where you have an advantage, where you, where your projects will are robust to down cycles and where they deliver highly advantaged returns. And so that portfolio of investment opportunities we're very keen on prosecuting kind of across the cycles and I think that's what we're always mindful of is ultimately we know there's going to be business cycles, commodity cycles, price cycles, but ultimately the demand for the products that we're trying to produce and the advantage of the projects that we're investing in to produce those products are going to be needed. And so having the constancy of purpose there and being able to continue to invest through the down cycles are really, really critical. And so that's, I think fundamental to how we're thinking about this is we got good projects we need to execute on those projects and if we find additional opportunities as we move forward, we need to invest in those as well. That's going to drive kind of the approach that we take to the rest of the balance sheet and our capital allocation priorities.",
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          "text": "Thank you.",
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          "text": "Thank you.",
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          "text": "The next question is from Betty Jang of Barclays.",
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          "text": "Good morning. Thank you for taking my question. I want to ask about the Permian efficiencies and trends in general. I know we will get a lot more in December, but if we could get some early flavor on what you're seeing in the fields, specifically these 3.5 to 4 mile laterals seems really interesting. And is that part of the synergies that you have identified with Pioneer initially? Sure. I'll start Betty and I'll let Kathy add some perspective as well. I would say just at a very high level, we could not be more thrilled by what we're finding with respect to bringing the two organizations together and the opportunity that's in front of us. I think we certainly saw a big opportunity for ExxonMobil to bring some of its strengths to the Pioneer acreage and the work that they were doing. We anticipated the reverse happening where the organization Pioneer could bring a lot to what ExxonMobil was doing, but frankly very hard for us to estimate that prior to closing the acquisition and getting together and working together. I think what we're finding through that process is there's a real big opportunity to bring a lot of what Pioneer is doing into our operations. Just a couple of examples. You know, they've got a world class water infrastructure network that we're now leveraging to serve the combined assets at a much lower cost. They've got a remote logistic operations center to help on their supply chain and we're taking full advantage of that. We just achieved an all time pioneer record for drilling performance in terms of lateral feet drilled per day. We're leveraging the cube design that we had and applying it to good effect in the pioneer acreage. We're harmonizing a lot of the specifications that we have on materials and services to try to take advantage of the scale and to simplify the procurement supply chain and drive cost efficiencies. And then I would just say as everyone talks about, there's a lot of art to this. Drilling and completions, improvements and getting the best thinking of both organizations and actually in combination developing thoughts and approaches that neither organization came up with independently I think is all manifesting itself in additional synergies. And we're bringing those synergies to the bottom line faster than we had anticipated and they're larger than we had anticipated. So it's a really, I think, good news story and one that we're going to spend quite a bit of time talking to you about on December 11th. And I know Neil and his team are real keen to share some more of the specifics to help kind of take what has been some high level indication of value and translate that down into a lot more detail so that all of you can get a much better feel in terms of what's happening there. Anything else to add, Kathy?",
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          "text": "No. I mean we initially talked about an average of 2 billion in synergies over the next decade. Obviously that would start smaller and build and we're clearly seeing more synergies than we initially anticipated. And as Darren said, Neal will definitely enjoy the opportunity in December to give an update on that and quantify it.",
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          "text": "More specifically, I would just say that the focus of that team is NPV and maximizing nvp. I think the, the drive, like we've always said, it's not a volumes game here, it's a value game here. And the great news is we're seeing a lot of value.",
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          "text": "The next question is from Bob Brackett of Bernstein Research.",
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          "text": "Good morning. I'd like to talk a little bit about Proxima rebar and your comments around the addressable market. If I think about steel, steel is almost 2 billion tons a year. Half is construction and infrastructure. Ish. Rebar, it's four or five hundred bucks a ton. And so the rebar market is something like say a 400ish billion dollar market. You're talking about 30 billion. How do you think it's almost heart back to value versus volume. When you think about putting this product, which again as you said, is lighter and stronger into the market. Do you go for value and pricing, or do you go for market share? And is the 30 billion reflecting that, or is that just a preliminary sort of estimate? Thanks, Bob. Thanks for the question. I think so I would say we're going to have targeted areas of rebar applications that we'll look at for Proxima. So it's not. We're not trying to address the entire market for rebar, but. But for the rebar markets where we think the value in use for what we're doing is strongest and therefore generates the most opportunity for earnings growth. So it's a segment of the rebar market that we're starting with, recognizing that we're pretty early into it. I think what we're finding, though, through that infrastructure market is, as we said at the beginning, when we're looking for opportunities, is they've got to be big markets with big value in use. In order for it to be a material effort at some point in the future, it's got to be material with respect to ExxonMobil. And so they've got to be big markets. And so we're focused on that. Rebar actually in the infrastructure market is not the biggest one where we see an opportunity. There's also a lot of advantages just using this thermoset resin as an epoxy. And there are many, many applications into a number of different industrial uses that where there's great, huge value and use from the epoxy and good margins and good growth opportunities. Also a lot of applications in the automotive sector, particularly as you think about EVs and lightweighting, this is an incredibly strong, incredibly versatile product that lends itself to a lot of applications in the automotive industry. And so longer term, we see opportunities there. And so what we've really been focused on at Proxima is making sure that we've got a good understanding of the value in use, that we're working with customers so that they can see the demonstrated value in use and make sure that we're testing out the value proposition. We've challenged the organization to put together a very aggressive plan in terms of growing Proxima and then have established what I would say are milestones in our development of that to continue to assess. Are we seeing this potential being realized and therefore earning our way to the continued emphasis on the growth and investment? In these early days, things look really, really positive. But this is a new to the world technology, new to the world processes that we're building into. The plan process and as you can tell from the way we're talking about this, we see huge opportunity here. It's very, very consistent with kind of the history we have in our historical chemical business in terms of taking molecules, developing unique applications with unique performance parameters and then selling those into large market applications. And this fits right into our wheelhouse with respect to that. So it's early days. Rebar is one of the first out the gate. But I would say there's a lot more to come in this space and feeling really, really excited about this opportunity. Interesting. Thank you. You bet. Thank you.",
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          "text": "The next question is from Jean Ann.",
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          "text": "Salisbury of Bank of America. Good morning. With China One startup drawing closer, what is your view on the medium term asia chemicals market? China 1 does mostly high performance chemicals. Do we need to see a return all the way to mid cycle chems margins for that project to meet your projections? Yeah, I'll start with that and then hand it over to Kathy to comment on it. But I would say when we went into the China One project we recognized, I'd say the macro challenges with the chemical industry, particularly in China. And so one of the things that underpinned that investment and the thinking behind it was making sure that as you point out, that it's going to be high performance but also low cost and therefore competitive in bottom of cycle conditions and generating returns and making money in tough environments. And so we kind of went into that with our eyes wide open and actually as we've progressed the project feel really good about where we've ended up with the project. So my expectation is it'll be a valuable part of the portfolio even as the market remains challenged. And that challenge will exist for some. We continue to see good demand growth, but there's just a lot of supply that the industry has to work through. And it will take time for the rationalizations to occur. But we'll be in a good position as we've demonstrated to date that our portfolio is built for these tough conditions. And therefore our view is once the market clears, we'll see a lot more upside than we've experienced here over the last couple couple of years. Anything to add, Kathy?",
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          "text": "Yeah, the only thing I'd add is, you know, for us, China is going to be one of the biggest drivers of chem growth longer term. Right. As they continue to have their population kind of moving up to the middle class. And longer term chem growth is usually a bit above gdp. And so the fact that we were able to strategically place this big project in China moves us from what was 100% importation model to now having our own production there on the ground. That's very low cost. So we would expect even though Asia continues to be in bottom of cycle conditions because of the low cost of this facility, we should get to positive cash results reasonably quickly and it will be a very resilient asset for us long term.",
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          "text": "Great, thank you. Thank you Jan.",
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          "text": "The next question comes from Biraj Borkhotarye of Banks America.",
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          "text": "I apologize.",
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          "text": "Yeah, otherwise I would have said, look, the starting point was look at pioneers, you know, S4 as the starting point. You know, they would have been projecting their own capex, you know, before we put Exxon Mobil and Pioneer together at I'll call it beginning at 4.5 billion and sort of building to the $5 billion level over time. So that's a starting point. But you know, we are going to be looking at the Permian holistically and we're going to be putting our collective dollars kind of into an overall production plan and program that we think is going to drive the highest levels of efficiencies and the highest returns, as Darren already mentioned. So the one other thing I just want to take the opportunity to mention is we have been guiding to capex and exploration expense. We had said for this year that's going to be $28 billion. That's what we still think it's going to be. That's 25 billion for ExxonMobil and about 3 billion for Pioneer. We're going to move to Cash Capex for our guidance going forward and we'll talk about that more during the corporate plan. That's a metric that is consistent with what other IOCs kind of guide to. And it will make it easier for you to translate that information kind of into the cash flow that we provide when we report our results.",
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          "start_time": "00:48:42,280",
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          "text": "Great.",
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          "text": "Thank you. Thank you, Ryan. The next question is from Paul Chang of Scotiabank.",
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          "text": "Thank you.",
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          "text": "Good morning, Darren. I'm interested. Thank you. I'm interested by your comment about the synaptic graphite.",
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          "text": "Is this a long term over the.",
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          "text": "Next 10 years, or that this is like over the next five years become a potentially that a very sizable business for the company. And when I say sizable, I mean what is your capability to ramp up the production volume within the next five years if the market is there to accept it? I mean, trying to understand that how big are we talking about this one and what kind of timeline we're really talking about? So, yeah, thanks, Paul. I think I would talk about Proxima and our carbon materials venture maybe collectively there, because there are two examples of basically looking at our portfolio today, looking for where we saw some advantaged feedstock, where we've got access to low cost feedstock, and then looking at our technology and capability to take that feedstock and build a product that meets an existing need out there with additional advantage and value to customers. And that's kind of the approach we've taken across both of those. I think Proxima, you know, as I said earlier, we challenge the organization for both of those new opportunities to put together an aggressive schedule, what it could look like and how quickly we could ramp it. And those businesses have the potential to get fairly large moving forward in the Next, call it 5 to 10 years and multiple billions of dollars. That's the potential that we see in terms of our ability to ramp up production and sell into that marketplace, assuming that the technology scales up and commercializes successfully and that we get the kind of customer acceptance that we're looking for. So that's, I think aggressively we could make that happen. And we've set ourselves kind of a plan that allows us to achieve that. But recognizing these are new products, new technologies, just beginning to scale these things. We've got a number of steps as we move towards that broader ambition to demonstrate to ourselves that it will be successful because we're not going to rush in and spend a lot of money until we convince ourselves that what we're seeing today at a much smaller scale, we're seeing as we ramp this up and implement these technologies. So the plan today has investments that grow both of those businesses in the early stage to demonstrate the value proposition that we believe is there. And assuming as we go through the next few years that we see what we expect to see there, then we will ramp up the spending and build those into the plans to build on the early successes that we're seeing. So you kind of think of it as milestones along what could be a very rapid growth plan. But we're not locking in the rapid growth or locking in the capital investments until we Demonstrated the success that we believe is going to be there.",
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          "text": "Yeah. The only other thing that I'd add to that and something our EMPS business is really good at, you know, we have to qualify all these new products for their end user in any company. Right. And that takes a lot of time and effort on our part. Again, it's something that our EMPS business is quite skilled at doing. We do that today as we bring new products to market. But that also creates, as you do that, a bit higher kind of barriers to entry. Right. And again, that's something we bring a lot of skill to. So, you know, while it will take us time to build these different ventures up and the product qualifications for different applications, as we do that, we'll build growth and momentum and it'll be hard for others to come in.",
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          "text": "Very good.",
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          "text": "Thank you.",
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          "text": "Thank you, Paul. The next question is from Jason Gableman of Cowan.",
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          "start_time": "00:53:19,670",
          "end_time": "00:53:20,126",
          "text": "Morning.",
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          "text": "Thanks for taking my question.",
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          "text": "I wanted to ask about the advantaged.",
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          "start_time": "00:53:24,958",
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          "text": "Asset earnings in the quarter which were.",
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          "text": "Lower quarter over quarter and I'm just trying to understand the underlying drivers of that decline. If I think about it, Guyana Production was down 30,000 barrels a day. Oil production from Pioneer maybe added 100,000 barrels of oil. So it kind of implies that the Guyana earnings per unit are about three times what you're getting from the Pioneer assets. And I wonder if that math is reasonable or there were other factors that were contributing to that advantage. Asset volume, earnings, impact on the quarter. Thanks.",
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          "start_time": "00:54:13,640",
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          "text": "So the biggest thing that impacted that, as you already mentioned, was the tie ins for Lisa 1 and 2 to the gas to energy project and that that impacted our Guyana overall volume. And so that impact was only partially offset by getting the additional month of Pioneer kind of volumes on the other side of that. So those were the two biggest movers. If you take a step back from that though, and look at where we're at on a year to date basis, I mean you really see the power of the Pioneer acquisition and Guyana volumes increasing year over year. So on a year to date basis, our advantage, volume growth and up gave us almost $3 billion of incremental earnings. And that's the engine, you know, that we're counting on long term.",
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          "text": "Okay.",
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          "text": "Was there anything that was unique to Pioneer contribution in the quarter that would have depressed it versus where it was last quarter?",
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          "text": "Nothing unique. I mean, Pioneer's overall contribution in the quarter, just in terms of the volumes they produced were, I would have said, pretty steady. I mean down marginally quarter over quarter. But again, we only took 2 months of the quarter from last quarter relative to 3 months this quarter and in any quarter in the Permian, we're seeing growth obviously year on year, but on quarter to quarter those results might look a little bit different. But we're really pleased overall with what we're seeing in production. I mean, we had a third quarter production record in the Permian of over 1.4 million oil equivalent barrels. So, you know, both the ExxonMobil operation and the Pioneer operation in the Permian is going really well. And obviously Darren talked a lot about the efficiencies that we're seeing as we move to the, I'd say deeper technology that ExxonMobil is bringing in its cube development and getting the best of both, both in terms of drilling and in terms of completion experience from both companies. And applying that across all the acreage.",
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          "text": "In the Permian, I'd just add on the earnings basis with the step up, you've seen increased depreciation with bringing Pioneer into the portfolio.",
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          "text": "Yeah, the last thing is, I'd say if you looked at Pioneer on a cash flow basis, we're already cash flow accretive, which is what we expected. And obviously that neutralizes for the incremental depreciation that we took on through the purchase accounting last quarter.",
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          "text": "Okay, great. Thanks for the answers. We have time for one more question. Our final question will be from Roger.",
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          "text": "Reed from Wells Fargo. Yeah, good morning.",
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          "text": "Thanks for sending me in here. To stay away from the December questions, let me throw one at you here. On the overall op cost savings, the 15 billion total by 27, you know, obviously about three quarters of that's in. I was just curious. You mentioned earlier, Darren, you know, a technology company, is any part of that cost savings up to the 15 related.",
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          "text": "To any sort of an AI effort.",
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          "text": "Internally, or is it strictly the logistics.",
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          "text": "As you've talked before?",
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          "text": "And if so, is there something beyond the 15 billion as you think about.",
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          "text": "Kind of a technology change over time?",
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          "text": "Yeah, thanks, Roger. I'll start with the end of your question, which is my expectation is there's more to come in this space and I'll talk to AI more specifically, but I would just context it more broadly in that if you look at the transformational change that we've been making across the entire enterprise, we're very early into that process. We just, you know, this year, the plan that we're developing that we'll talk to you about on December 11, you know, the new organizations that we put in place, the gbs, the supply chain, even the trading organization, those are just they were kind of the first had some time to run and develop a full blown plan this year. And so with a lot more experience under the belt and we continue to see a lot of opportunity out there that will take us time to capture. And so I would see that there's going to be a continuum there and continued progress that we're going to make based on the centralized approach and the organization getting more and more efficient, but more importantly more effective at executing on the core task of driving value in the company. So my view is that we're going to deliver on the 15 and then as we look going forward, there'll be more to come as that organization continues to become more effective and more efficient. The technology side of the equation I think is another area that, that will take longer to manifest itself. But I have a lot of optimism that the work that they're doing will ultimately drive not only I'd say the revenue side of the equation and basically higher value on that side, but also drive cost down. And so we'll get kind of that double effect of higher revenues and lower cost to improve profitability. There's a good portfolio of things that, that organizations working on. And because we've now centralized that and organized ourselves our own capabilities, we can now take the best capabilities and put them to the hardest problems, the most valuable problems, which I think are going to end up delivering a lot of good value. And AI is part of the equation. So there is a concerted effort to make sure that we're really working hard to apply that new technology to the opportunity set within the company to drive effectiveness and efficiency. So that's certainly part of it. Like everything that we're doing, it's a thoughtful approach. It's one where we're going to make sure that we can get the value that we anticipate. We don't like jumping on bandwagons and kind of talking in aspirational terms, but I would tell you we do see a good potential there, particularly in a lot of the data rich areas of data. The business and the team's working on how best to take advantage of AI as a tool to help drive value there.",
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          "text": "And I'd certainly say if I take one step up from AI and just talk about technology more broadly and especially information technology, that's a space where we continue to have a lot of opportunity. We grew up with very siloed businesses which resulted in our processes not being very standardized or conforming across the company. That made it more difficult, I'd say, to apply single type technology applications across the company. But that's something that we're getting at today. And so we'll be continuing to automate much of what we do today manually. And that's going to drive importantly improved effectiveness as well as improved efficiency and a way better expense experience for our people and our customers and our vendors because we're not always the easiest company to do business with when it comes to information technology and self service and those types of things. So that has a big role to play as we look forward. We have a pretty complicated kind of IT environment as we sit today and we're in the process of simplifying that which is going to drive a much higher degree of automation into the business and give us importantly, way better and more timely information that will be used to make faster, better business decisions to drive better results kind of in the business more generally.",
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          "text": "All right, thanks, Roger, and thanks everybody for joining the call and for the questions.",
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          "text": "We will.",
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          "text": "As usual, we're going to post the transcript of this call to the investors section of our website early next week. But before we wrap up, I want to again remind everyone we mentioned it a few times this morning of our Corporate Plan Update and Upstream Spotlight, which.",
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          "text": "Will be held next month, December 11th. And we will look forward to connecting with everyone again then. So with that, have a good weekend.",
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  {
    "call_id": "Exxon Mobil Q2 24",
    "call_title": "Exxon Mobil Q2 24 Conference Call",
    "symbol": "Exxon Mobil Q2 24",
    "start_time": "2025-01-08T22:15:46Z",
    "end_time": "2025-01-08T22:15:48Z",
    "duration": 0,
    "status": "COMPLETED",
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      "call_id": "Exxon Mobil Q2 24",
      "text": " Please stand by, we are about to begin. Good day everyone and welcome to this ExxonMobil Corporation second quarter 2024 earnings call. Today's call is being recorded. Good morning everyone. Welcome to ExxonMobil's second quarter 2024 earnings call. We appreciate your joining us. I'm Jim Chapman, Vice President Treasurer and Investor Relations. I'm joined by Darren Woods, Chairman and CEO and Kathy Michaels, Senior Vice President and cfo. This presentation and prerecorded remarks are available on the Investors section of our website. They are meant to accompany the second. Quarter earnings news release which is posted in the same location. During today's presentation we'll make forward looking comments including discussions of our long term plans and integration efforts which are still being developed and which are subject to risks and uncertainties. Please read our cautionary statement on slide 2. You can find more information on the risks and uncertainties that apply to any forward looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides which are also posted on the website. And now I'll turn it over to Darren for opening remarks. 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. Overall market conditions were softer in the second quarter. Oil prices remained firm as a reminder at Brent, between 60 and 80 dollars a barrel, real and 10 year average refinery and chemical margins. We expect to generate between 80 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 at 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, 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 Proxima and Carbon materials. With Proxima, we transform lower value gasoline molecules into a high performance High value thermoset resin that can be used in coatings, lightweight construction materials advanced composites for cars and trucks, including battery boxes for electric vehicles. Materials made with Proxima are lighter, stronger, more durable and produced with significantly fewer GHG emissions and and traditional alternatives. In March, we showcased the automotive uses of Proxima at the world's leading international composite exhibition in Paris. We're progressing projects in Texas with startups planned in 2025 that will significantly expand our production of Proxima. We see the total addressable market for Proxima 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 where 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're 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 use products for established and growing markets. Consider VistaMax, 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 VistaMax 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 profitably 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. Thank you, Darren. Now let's move to our Q and A session. As a reminder, we ask each participant to keep it to just one question. And with that, operator, we'll ask you to please open the line for our first question. Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit 1 on your telephone. The first question comes from Neil Mehta of Goldman Sachs. Your line is open. Please go ahead. Good morning, Darren and team, and thanks for the update. I want to build on your comments on Pioneer now that it's under your umbrella. Can you build on some of your comments around 1, how is the asset performing from a volume and type curve perspective relative to expectations? And two, you alluded to synergies tracking ahead of expectations. Can you help delineate what. What those buckets of outperformance are? Yeah. Good morning, Neil. I'll start with a few comments and then let Kathy kind of add. On top of that, I would say early days yet, two months in, but the work of the team prior to the change in control and then what we've seen since then is extremely encouraging. As we've stated, the Pioneer assets basically delivered a record performance in the second quarter. And if you think about the context of doing that, with all the change that was going on with respect to the merger, I think a real testament to the quality of the people there and the work that they've been doing. So I'd say vectors are all pointing up, I think probably better than what we had anticipated. But I would also say it's early in the process. The teams today are working very well together, which has led to frankly identifying a lot more value opportunities than, frankly, I think either of us could see when we were on opposite sides of the fence. And now that we're together working, we see essentially a lot of opportunities to transfer the best practices of Exxon Mobil into Pioneer and likewise to transfer a number of best practices from pioneer into the ExxonMobil base, which, when you think about our size, has some tremendous leverage associated with it. And so that's all being worked through in detail. As you know, when we commit to some of our objectives, they're based by some very detailed plans that sit behind them. The organization today is working those plans. But we already see significant upside potential, not only in the magnitude, but in the pace at which we'll be able to deliver them. So I think a really positive story there. I'll let Kathy maybe add some additional details. Kathy Sure. I think one of the things we've been really pleased by is the number of learnings that we've already had from Pioneer. And so not only will we bring our technology and cube development to them, but they're bringing a bunch of learnings to us. So we're already utilizing their remote logistics operations center in our own drilling and completions operations in order to improve supply chain. They've done some things on the procurement side I'd say that we think can help us to kind of leverage up our expertise. They've been really good over the years of blocking up their acreage. So we think that's another thing that, that ultimately we can benefit from. And then as I think everyone knows, they've got a quite large water infrastructure in the Midland Basin and we'll be looking to also leverage that. So we've been really pleased with what they bring to the table. And we're off to a really good start as we look at building an integration development plan with them that fully utilizes the technology that we bring to the table. And so we're going to have a corporate plan update in December. We're going to do a spotlight on the upstream and we'll update where we're at with the synergies and how we're looking forward at that time. Yeah, I just, I guess cap it off, Neil, with you know, we said at the time we announced the acquisition that we were going to produce more barrels at a lower cost and in a more environmentally friendly way. That continues to be the case. That's obviously good for our company. But more importantly, as we said at the time, we continue to emphasize it's good for the US it's good for the US economy, it's good for the people living in the US it's good for US businesses and critically it's good for US Energy security. So I think this is, as I said at the time, going to be a win win proposition for all. All right, thank you, Darren. Thank you, Kathy. The next question is from Betty Jiang with Barclays. Darren. Kathy, good morning. Since we just talked about Permian hit on the other region that's also hitting record production. So Guyana volumes continue to exceed expectations and the FPSOs just continue to produce well above capacity. We'd love to just get an understanding of do you think this type of performance is likely to continue and does that translate relatable for what you would expect for the future projects that's yet to come. Sure, I'll take that, Betty. Thank you and good morning. Good to hear from you again. I would say, you know, what you're seeing is the collective effort of our organization focusing on what is a very high value development and making sure that we are taking advantage of all the opportunities we can find to safely grow production. And as you commented, we're seeing some significant improvements with production rates well above what we had based the investment decision on. And that's continuing across all three of them. We try to take that into account as we develop the next. And so in theory you would think we build that into the base and don't continue to see that. But frankly, our experience is telling us otherwise, which is this organization complemented by the work that we're doing with our technology organization, our global operations and sustainability organization. Every element of the organization that we have now created and functionalized is very focused on maximizing value. And so with these new organizations and that focus, they continue to find additional opportunities. So I would bet that we'll continue to see outperformance versus the basis on which we fid. But I would also tell you that every development is unique unto itself and obviously we got to get it up and running and then let the teams get after it and find the opportunities to safely increase its capacity. But I would just tell you, I would bet on our people to find that we've got a long history of doing it and it's clearly demonstrating itself with this unique and valuable opportunity here. Thank you. You bet. Thank you, Betty. The next question comes from Doug Leggett with Wolff Research. Hey, good morning. Thanks for taking my questions. Good morning, Darren and Kathy. Morning. I'm still getting used to the new moniker, Darren, but thanks for having me on. So I wonder if I could ask a question about portfolio. Now that you've got Pioneer in the door, you've had a, you know, you've got a lot of things that are perhaps you could characterize as maybe non core, a lot of tails in the portfolio. And I'm just curious, we haven't really heard much on the asset disposal front in a while. And I'm curious if now that you've got two very significant concentrated assets to a certain extent, the Permian and Guyana, what it means for the portfolio in terms of high grading opportunities going forward? I'll start with that and then I'll let Kathy add anything that she wants to. But I would say actually we've been fairly Aggressively going after the tail. You remember, I think back in 2019 we had announced that we were going to divest about $15 billion over time. Of course, we got into the pandemic and we said we're not going to, you know, this is not a forced march. We're going to basically divest when the market conditions ensure that we can realize the value that we think the assets that we are marketing can be realized. And frankly, that's what we've been doing. So as you look at where we're at to date, second quarter this year, I think we've basically gotten to the $15 billion in the upstream. And then if you look at what we've been doing in the downstream, there's another few billion dollars that we've added on top of that. So frankly, from a cleaning up the tail standpoint, we've made significant progress. Obviously there's a few more things that we're working on and we'll continue to assess every one of the assets in the portfolio, make sure that they are competitively advantaged. And frankly, as we look at new investments, we force those investments to compete on an industry wide basis and make sure their advantage versus the industry and therefore can be supply product at low cost to supply. We also do that with all of our existing assets. And if they're not competitively positioned on an industry supply curve, then the organization has two options. Either we come up with an advantaged investment that makes them more competitive and moves them to the left of the cost on the cost of supply curve, or we look to divest. And that process has been ongoing across all of our businesses. And then obviously the timing of when we then take action is a function of realizing the value that we think those divestments should bring. And we're patient, we're not going to rush that process, but I would just say staying after it, being very steady, waiting for the market to meet, to be where it needs to be in order for us to reevaluate, has paid off significantly. And basically we're delivering on what we said we were going to do and we'll continue to look at it, but I wouldn't, I don't see any big step changes here in the, in the medium term. And the only other thing I'd note, Neil, is, you know, you can see. In our cash flow bridges, Doug, sorry. I'm sorry, Doug, I'm sorry. But you can see in our cash flow bridges, you know, we're pretty consistently every quarter bringing in more proceeds from the divestments that are occurring, you know, in the first half of the year that was $1.6 billion. And then I would just note we had a lot of activity in upstream and so that generated some positive earnings for us in the quarter. And so if you look at my prepared remarks, you know, that we published earlier this morning, I talk about sort of 380 million in the upstream being kind of these other one off items. And that was a lot of earnings coming in from divestments only partially offset by the one off cost associated with Pioneer. Terrific. It would have been worse if you'd called me, Jennifer. Cathy, but thanks so much. I appreciate the time. Yeah, good, appreciate that. Sorry about that. Doug. Doug, congratulations on the new shop, new platform and to you, Jim, thanks so much. The next question is from Devin McDermott with Morgan Stanley. Hey, good morning. It's taking my question. So, Darren, you had a lot of good updates in your prepared remarks on some of the low carbon initiatives. There's been a lot of progress there, it seems, over the past few months and quarters, which is great to see. Now I think back to the corporate plan you laid out late last year. This is a growing wedge of your overall capital spending in each of the next few years. So I was wondering for some of the investment opportunities, more about what mileage you're focused on to actually allocate more capital to these areas. So what's needed to make final investment decision on carbon or move forward with carbon materials or build the scale you talked about in lithium production? Is it more commercialization, uptake, technology development, regulatory clarity, something else? Sure, yeah, you broke up just a little bit on that, Devin, but I think I got the gist of your question. If I don't hit the mark, then please steer me in a slightly different direction. I think your question around what's required to kind of continue to move along in our investments in the low carbon solution, across the portfolio of products that we've been talking about. I would just say fundamentally we expect in the low carbon businesses and in fact some of these new products that while they contribute to a lower carbon future, they also bring significant value. And in use in today's application, they have to compete in the portfolio, they have to be advantaged versus what's out there today. And they have to basically generate good returns across the commodity cycles. And so the fundamental philosophy that we've been applying in the base business also is required in these, the new businesses that we're trying to generate. So that's I think foundational. What each of and you know, Dan, Ammon in particular. But then the stuff that's coming out of the product solutions organization has also got to meet that initial hurdle. And then as you look across each of them, the hurdles to clear, to deliver on that expectation, very little bit, I would say in Dan's business with the carbon capture and storage, you know, he's, he and his team are building a brand new business. And so there are very few, I think, examples of where the company is not only developing the technology and the infrastructure and logistics system, but also developing the capacity to supply while developing the demand and developing the market in general and advocating on what I would say are the, the initial policies needed to get things kick started. So there are a lot of moving parts. I would say the broader industry and business community, I frankly haven't gotten far enough along in this to truly appreciate just how complicated it is. But I would say leveraging the capacity and capability that we've built over the decades, doing this in other parts of our company, particularly in the upstream, that we're leveraging those capabilities and making really good progress there. On the Blue Hydrogen project, you know, as we've worked through the engineering and we've got a really good line of sight to what that project can deliver, obviously a critical element of that is getting the IRA legislation translated into final regulations. And that's a process that's been ongoing. We're optimistic that the regulations will reflect the intent of the legislation. And if it does, I think we'll have a very attractive project that we can then fid here once those regulations are finalized. So I'm optimistic in that space. And as you may have seen, we just added another 500,000 tons of carbon capture and storage into Dan's portfolio. And there's a pipeline that the team continues to work. So we see continued opportunity and growth with good returns in the carbon capture side of the equation. On the lithium, same thing. While lithium is an established market, it's fairly small with respect to what its ultimate potential is. And of course we're bringing on a new production method with some new technology and so again, doing the work to understand what the investments required there are and to establish and ensure that we've got a real advantage versus what else is out there and what else needs to come on to meet the growing demand in lithium. But again, I feel good about that. We've told the team, don't, you know, we're not looking to rush this through and get something, get money spent. We're looking to make sure that we build a very strong long term foundation. So none of the work that we're doing in these new businesses is schedule driven. It's all about establishing successful long term foundations. And then maybe just briefly touch on Proxima and the Carbon Ventures, which, you know, that's a broader effort that we've been on for quite some time, which is to say leverage our technical capabilities to transform molecules and apply that to markets that exist with unmet needs. And I think we're making really good progress with Proxima. We've got some, I think, very high barriers to entry and competitive advantages there. And so I'm anxious to kind of prosecute that business and establish it as quickly as we can because we see real potential there. And same with Carbon Ventures again, leveraging our ability to transform the molecules, shape the molecules and get some structures that improve performance. Think there's a big opportunity there. But that's, you know, I would say Carbon Ventures is still early in the technology cycle, but I think we've gone far enough along to see some real opportunity there. And as I said in my prepared remarks, the challenge I've given the product solutions organization is, you know, what's a realistic but aggressive business plan look like and what would be the investment required to establish that? And that's good because it grows value today. But, but it also positions us well as those molecules become less demanded in their traditional applications, it becomes a much lower feedstock to these new applications. And so there's a lot of opportunity to diversify the slate, protect the business or diversify the business as we move through the transition. So long answer, but a lot of variables at play here, but frankly all variables that we feel very comfortable managing. And I think the progress we're making there demonstrates our capability to manage those things. Great, thanks Darren. I appreciate all the detail. Thank you. The next question is from John Royal with JP Morgan. Hi, good morning. Thanks for taking my question. So my question's on the CapEx guidance update. We see that you moved the legacy CapEx up to the top end of the prior range and then obviously you layered in Pioneer as well. But can you talk about the drivers of the legacy CAPEX bumping up to 25 billion for the year? Yeah. Good morning, John. I'll start with that and then let Kathy finish up. But so the way the reason we put a range out on the CapEx is as we, you know, we build these plans and the previous year starting around this time in the summertime and then kind of lock and load them in October and obviously there's a lot of things that develop and evolve from, you know, the middle of the previous year to as we go into this year. That range is not meant to have you guys slice it down the middle and fix on a number. The range is to say we've got optionality here and as things evolve, we may reduce some of the spending or if we find that the opportunities are panning out the way we expect, we may be on the other end. So that range is truly where we expect to be somewhere in how things evolve and what the opportunity set looks like. I mean, the key focus here is to make sure that we are investing in highly advantaged, highly profitable projects. And basically, as we worked our way from October of last year into this year, we see a lot of attractive opportunities that we continue to invest in, which puts us at the top end of that, consistent with what we understood the opportunity set could look like as we went into the plan process last year. That's why we're coming in at 25. And then of course, we're using the Pioneer number to add on top of that. But Kathy, anything to add to that? No, I would just say, obviously we have a lot of projects coming online in 2025 and the exact pace of all of those, and therefore, you know, making sure that we provide it sort of enough room, I would say, in the initial guidance supporting of all of those projects that are coming online in 2025. You know, we can't pinpoint predict all of that as we put our plans together for the year. And so, you know, just as an example, China one is a huge project. It's going to be coming online early next year as an example. So there's always a little bit of give and take, which is why we give the range to start with. Thank you. Ah, the next question is from Jason Gabelman with TD Cowan. Hey. Morning. Thanks for taking my questions. I actually wanted to follow up on the 2025 project startups that you just mentioned. And thanks for a little bit more detail on the China Chemicals complex. But as I look to the other projects coming online, I think the largest earnings contributors include the Permian crude pipeline and then in the upstream Golden Pass and then the next Guyana boat. So I was just wondering if you could provide a little more color on those projects in terms of how they're progressing and kind of phasing through the year. Thanks. So I would say consistent with the plans that we put out, the projects are all, with obviously the exception of Golden Pass, moving consistent with the plan development and the announced dates that we talked about all of them. I think we feel really good about in terms of the work that we're doing and the case for the contributions, the returns, the earnings that we expect to get out of those projects. I think we continue to feel good about underpinning all the projects is we never try to take a position on where we're going to be in the market cycle, but instead make sure that these projects, when they come on, can compete in any of the areas of the cycle. And we've actually found that if you look at the investments we've made since 2018 brought online, if you look at the aggregate return of that portfolio, it's exceeding the basis in which we fid those projects, even as we've been say in the chemical business at bottom of cycle conditions. So I think we continue to demonstrate to ourselves that the time we spend to make sure these projects are advantaged in the base case is paying off. And then of course our global project organization is really continuing to drive very effective execution of the portfolio with keeping our cost well within the FID basis and generally delivering it faster and therefore bringing more value sooner. Yeah, and I would just note it's an especially big year for our EMPS business. So you know, I already that China one, you noted a couple of projects. I mean the Singapore Rigid upgrade project is a pretty big project. You know, we have a upgrade project at Foley in order to bring on, you know, ultra low sulfur diesel. We've got the Strathcona project for renewable diesel coming online in 2025. So, you know, really big year for the AMPS business in terms of the number of projects we have coming online. And then we're going to continue to expand our advanced recycling. So we'll be adding more capacity as well next year. So you know, we note it. You know, again if you look at our IR slides, we talk about projects being a big driver of underlying earnings growth in the EMPS business and you see that supported by everything coming on in 2025. Thanks. The next question is from Biraj Borkateria with RBC. Your line is open. Please go ahead. Hi there. Thanks for taking my question. Just wanted to follow up on Jason's question and more specifically on Golden Paths. So I guess at this point are you able to confirm updated schedule guidance for the startup? And then second question is just going to some of your prepared remarks. If I think about your upstream portfolio, a lot of your growth is liquids or liquids price linked through LNG. I think you say 80% of your upstream is now linked to Liquids. So I was thinking, as you're building out your LNG portfolio and your trading function, is there any desire to diversify that sales mix a bit more or is this intentional and where you want to be? Thank you. Yeah, sure. I'll start with the last part of the question, which is it is a conscious decision to get weighted on liquid prices. And frankly, if you look at the LNG market and when you're building large LNG projects, you tend to sell those out and sign contracts in advance of the investment, which the market today is linked to oil. And so we continue to have a desire to lock in a significant portion of those developments. So we've got surety on the sales side of the equation as we bring those projects up. So my expectation is we'll continue to be weighted on that and we're very comfortable with that. In fact, there's been a huge drive since I've been in this job and brought Neil into the upstream to basically shift the portfolio and get a little heavier weighting in the oil side. As I mentioned this morning on cnbc, if you look at the oil that we're producing today, we're producing more oil than at any time since the merger of Exxon and Mobil. So that strategy is beginning to manifest itself on your golden pass the project. So we've just gotten through, reached the venture, just reached a settlement with Zachary. And so that venture is in the process of kind of restaffing and getting started back up again. Obviously we're in the very early days of that, so there's still more work to be done. And of course the teams are very focused on getting back to work, effectively executing and bringing that project in as quickly as they can and as close to the original schedule as they can. Right now our estimate is we're going to see about a six month slippage. So we had anticipated kind of first LNG the middle of next year. We now are looking at probably the back end of 2025 for first LNG and that's kind of where the current schedule is. But I would just condition that with the teams are just getting back up and running and you know, they have a clear mandate to try to bring that in as effectively as they can. And my again, my expectation is they'll do better than we currently think, but we've got work to do. Understood. Thank you very much. Thank you, Rosh. The next question is from Steven Richardson with Evercore. Hi. Thank you. I was wondering if we could circle back. I appreciate all the conversation about projects and project execution and how you've got a number of of really important and interesting projects coming on in the downstream in short order. Just wondering. You've added seemingly quite a bit of length to your upstream portfolio over the last number of years. And as you think out beyond 26, 27. Darren, are the teams continuing to bring you new and interesting projects in EMPs, and do you think continuing that kind of pace of integration out in the plan horizon is still interesting? Maybe you could just talk about that. In terms of the investment mix and. The opportunities and maybe address EMPs and chemicals as well. Sure. No, I appreciate the question, Steve. I think you touched on a really important point. I think one of the advantages of the restructuring that we've done is we no longer identify our business with the products that we're making. So if you go back in time, the functional organizations that we established, we had refining organization that was producing refining products and we had a fuels marketing organization that was marketing fuels and we had a chemical company that was marketing chemicals. We've now combined all that into a product solutions organization which is supported by a technology organization, which again is not organized around any of our heritage businesses or heritage products, but instead is organized around core capabilities, core technical capabilities to deliver value to the businesses that they support. So while it may not be intuitively obvious that change in structure and the way we think about and talk about the business has also opened up a lot of white space in terms of the challenge here is how do we take our core advantages, core capabilities? Some of it includes our existing footprint, but a lot of it includes our ability to upsell and to identify value and use applications and combine that with a technology organization that's very focused on applying core technology capabilities to business challenges and business opportunities, which is starting to unlock applications that frankly in the past wouldn't have been identified because they didn't fit in the context of the organizations that we had in place. But today the aperture is much broader and the playing field is much bigger. And so we see that with Proxima and Carbon Ventures. My expectation is as we go forward, we'll continue to talk about those markets and we'll talk about the applications that we're developing. And the technology organization is continuing to look at how else can we use our capabilities and manipulating the molecules, and particularly hydrogen and carbon molecules, to make products that society needs and at the same time reduce emissions. So I think that organization has been given a license, a hunting license, to go out and find how we can lean into and create more value out there. And grow earnings. So my expectation is, as we go forward well beyond the 2027 timeframe, we're going to continue to bring in opportunity sets as we unlock them through the work of both our product solutions organization, but also also our technology organization. Then, of course, we can take advantage of our projects organization to then go off and build these things at scale and do it at a lower cost than anybody else. So I think there's a really powerful combination there. And our horizon extends well beyond the 2027 in terms of thinking through the pipeline and making sure that we're positioned to be successful well into the future. And I would just quickly add then. And that's true for Product Solutions, which has got the chemical portfolio, our specialty portfolio, and then what I would say are the energy portfolio, but more specifically the molecules that go into energy that we expect to become feedstocks of the future like they are today for our carbon ventures and Proxima Ventures on the upstream side, we've got a lot of obviously, growth potential through the, the back end of this decade. But we, you know, this is a depletion business. We recognize that. And so that organization continues to look well beyond the 2027, 2030 time horizon, making sure that we have got a good understanding of what it's going to take to keep that pipeline full. So I feel really good about that. I think the way we've organized the businesses and the central organizations that we've put in place to serve those businesses is going to have huge payoffs here in this space. The next question is from Roger Reed with Wells Fargo. Yeah, thank you. Good morning. Since y'all have probably the most geographically diverse set of operations of anyone we cover, I was just curious. You know, the most recent news this morning shows maybe a few cracks in the economy. If you could kind of give us an idea as you look across the products and the chemicals side, thinking, you know, that's where we really see the demand parts. What you're seeing, you know, kind of, let's say, China back around to our side of the globe. Sure. Good morning, Roger. I think the key message I would leave you with across our businesses, when you look at kind of pricing and margins, is there's two pieces, two halves to the equation. There's the demand side and there's the supply side. On the demand side, frankly, to start with chemicals, we see the demand basically returning to the kind of growth that we've seen prior to the pandemic, so basically growing at 1 to 2% above GDP. And so that's Back on track from a growth standpoint, certainly that's what we're seeing the first half of this year. The challenge in that business with the margins has been frankly from the supply side of the equation with a lot of capacity coming on and a queue of capacity yet to come on. And so that's been more of the story in chemicals, less of a demand and growth story and more of a supply story and a lot of supply coming on in the short term. And like the past, the challenge in the chemical business, given the large chunks of capacity that come on in discrete times, that you've got to grow through that capacity to get your margins back up again. One of the reasons why we stay so very focused on low cost of supply, feed advantage and importantly performance products is to make sure that we've got advantages above and beyond the commodity cycle. And you see that playing out now in our chemical business with earnings that frankly are well above what would be expected given the challenging market conditions that we see in the margin environment. China is growing, you know, despite maybe some of the. It's not growing at the rates that we've seen historically, the very high rates, but it's still growing at a, at a healthy, healthy clip. And as you come around to the US we're seeing kind of reasonable economic conditions and growth in the US as well. Europe, I think, is probably the most challenged area of the globe. And frankly, with some of the policies we see Europe implementing, my expectation is it becomes even more challenging, quite frankly, and unfortunately particularly unfortunate for the folks living in Europe given the, I think the drag that the policy they're putting in place is going to put on their economy. I think China's looking reasonable. India is growing and looks very, very healthy. The US is looking reasonable with good growth. Demand for on the energy side of the equation with petroleum products continues to be very high record levels of demand around the world. And again, I think very good supply coming into the equation there, which is keeping, you know, has brought margins from those very high levels that we've seen in the first quarter and then back into to last year. We're now getting back down into more typical ranges. And frankly, all of our plans anticipated that. It's always difficult to call the timing of it, but we certainly knew that the elevated margins that we were seeing in the refining business would ultimately come back into normal ranges. My expectation going forward then is we'll continue to see what I would say is historical volatility levels in that we'll see times when the margins spike and we'll see times when the margins are challenging. But again we built our refining business to be robust to those. And if you look at the work we've been doing to high grade that portfolio, we've taken out a lot of the low margin, less advantaged refineries and are now focused on the integrated refineries that have a mix of high value products that we're producing and are advantage from a size and scale and cost standpoint. And then on the gas side of the equation and the oil side of the equation, oil demand continues to be at record levels. Last year was a record. We anticipate this year will be a record and then next year will be a record. So demand continues to be fairly healthy from an oil standpoint. It's just a question of working through the supply that's coming on most of that led by what's happening in the Americas and then on gas that's going to continue to grow in demand. And it's another again a function of the capacity that's coming on. So I think good news is we're seeing the industry be very responsive to the demand and frankly it's very consistent with the foundation of the strategy that we put together which is you got to be low cost, you got to be on the left hand side of. The cost of supply curve. Thanks Roger. The next question is from Josh Silverstein with ubs. Thanks Darren. And Kathy, you continue to make good progress on the cost savings front. It looks like there was an uptick of about $600 million sequentially. It looks like you called out kind of a $200 million turnaround savings in energy products. I just wanted to see if you could provide some more examples of what's driving the improvement and how you take the current kind of 10, 7 to the 15 billion over the next few years. Thanks. 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 tax basis for the year to date where our structural cost savings is about a billion dollars. 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, that you mentioned, you Know, we're also obviously driving savings in terms of supply chain, you know, 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're 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're going to continue to see on a go forward basis. And then I would say longer term, as those centralized organizations start to standardize processes for the company, which you know, are quite disparate as we sit here today, we'll be able to apply more technology to get, I would say, even more automated in the things that we do, which will drive further efficiencies for us long term. So, you know, whether it's getting more efficient on logistics or getting more efficient because, you know, we're standardizing now between ourselves and Pioneer, standardizing all the materials and things that we're buying, those are the types of 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 develop. So we're feeling good about the progress we're making. And that overall target to get to $15 billion in savings between 2019 and 2027. Yeah, I would just, I guess one other way to think about it, Josh, is, you know, for the first time in the history of our corporation, we've organized ourselves to take, to focus on every aspect of delivering the business, irrespective of what that business is looked at, where the synergies exist and are now taking the experience, the collective experience of the corporation and the expertise in each of those areas and focusing it on, on an opportunity set. So the size of our business gives us a huge advantage here. And so a lot of these things you're seeing are accruing by basically taking the best thinking that had occurred around the organization around the world, and then applying that uniformly everywhere it's relevant. And that's happening time and time and time again. And so I think a very unique capability and capacity that, that frankly others can't match. And the benefits are showing up in these structural cost savings for sure. Also Showing up on the revenue side of the equation with respect to better marketing, better ability to sell into value. So there's, I think, huge benefit to the changes we've been making. We have time for one more question. Our final question will be from Bob Brackett with Bernstein Research. Good morning. I'd like to paraphrase a comment Darren made that lithium complexity is misunderstood by the industry and I'm intrigued. Is that a comment around the marketing and the relative youth of the downstream side, or is it a comment around maybe the upstream and the complexity of processing? Good morning, Bob. Yeah, that comment I meant to imply for more broadly the whole low carbon solutions business set, where as you look at each of those businesses, they've got their unique set of complexities. For lithium in particular, you're taking what is essentially a brand new technology, marrying that with some established technologies for subsurface, some established technologies above surface, consistent with our processing experiences and refining and chemicals. And so putting those things together in a new business to make a product. I wouldn't say has complexities that people can't comprehend. I would just say they're new and there haven't been very many people who have worked their way through that. Where some really unique challenges are, is in building brand new value chains and the carbon capture market as an example, where there's just, there's not an existing market today that pays for, for carbon removal that's being incentivized with government policy. Government policy is forming while at the same time you're trying to build the infrastructure to support that market, the logistics, the supply, and then at the same time develop a customer base. And so the complexity that I see in the low carbon space, that's a particularly challenging one because of all the moving parts and all the work that has to be done to try to piece those things together, to come up with frankly a business and business model that one, is sustainable for the long term and two, that generates returns that are competitive in the portfolio. But I have to say we're geared to do that kind of work. Our experience lends itself to that. And frankly, what Dan and the team is accomplishing, leaning on a lot of the core capabilities of the organization, we're tackling those challenges and making really good progress. I think on the hydrogen side of the equation, there's not a, a real vibrant market or a strongly economic market for a low, virtually carbon free hydrogen. So that's being developed. Obviously the government incentives are supporting that in the short term, but we've got to work our way to a market driven forces so that we are competing in an open market and not relying on government subsidies. So that's, I think one of the challenges in that space. But I think my comment was more generally that there's a lot of optimism around the low carbon businesses in general. But if you think about where progress has been made to date, most of that's been in the wind and solar and EV areas and all those are playing into well established markets. Power generation market is very well established. The automotive industry is very well established. Now they're bringing in new technology that have some of their own unique challenges, but they're not building brand new markets. In our case, in some of the businesses we're building brand new markets. Yeah, that's very clear. Thanks for that. You bet. Good talk to you. Thank you, Bob. And thanks everybody for joining the call. And for your questions. We're going to post the transcript of this call to the Investors section of our website by early next week. But before we wrap, I want to draw your attention to a couple of topics. First, a reminder. Later this month we will be issuing our annual Global Outlook, which includes our latest views on energy demand and supply through 2050 and which forms the basis. For our business planning. And second, please mark your calendars for our Corporate Plan Update and Upstream Spotlight, which is going to be on Wednesday, December 11th. And for more information on that, again, please see the Investors section of our website with that, have a nice weekend and I'll turn it back to the operator to conclude. Thank you. This concludes today's call. We thank everyone again for their participation. You may disconnect at this time.",
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          "text": "Quarter earnings news release which is posted in the same location. During today's presentation we'll make forward looking comments including discussions of our long term plans and integration efforts which are still being developed and which are subject to risks and uncertainties. Please read our cautionary statement on slide 2. You can find more information on the risks and uncertainties that apply to any forward looking statements in our SEC filings on our website. Note that we also provided supplemental information at the end of our earnings slides which are also posted on the website. And now I'll turn it over to Darren for opening remarks. 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. Overall market conditions were softer in the second quarter. Oil prices remained firm as a reminder at Brent, between 60 and 80 dollars a barrel, real and 10 year average refinery and chemical margins. We expect to generate between 80 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 at 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, 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 Proxima and Carbon materials. With Proxima, we transform lower value gasoline molecules into a high performance High value thermoset resin that can be used in coatings, lightweight construction materials advanced composites for cars and trucks, including battery boxes for electric vehicles. Materials made with Proxima are lighter, stronger, more durable and produced with significantly fewer GHG emissions and and traditional alternatives. In March, we showcased the automotive uses of Proxima at the world's leading international composite exhibition in Paris. We're progressing projects in Texas with startups planned in 2025 that will significantly expand our production of Proxima. We see the total addressable market for Proxima 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 where 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're 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 use products for established and growing markets. Consider VistaMax, 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 VistaMax 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 profitably 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.",
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          "text": "Thank you, Darren.",
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          "text": "As a reminder, we ask each participant to keep it to just one question. And with that, operator, we'll ask you to please open the line for our first question. Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit 1 on your telephone. The first question comes from Neil Mehta of Goldman Sachs. Your line is open. Please go ahead. Good morning, Darren and team, and thanks for the update. I want to build on your comments on Pioneer now that it's under your umbrella. Can you build on some of your comments around 1, how is the asset performing from a volume and type curve perspective relative to expectations? And two, you alluded to synergies tracking ahead of expectations. Can you help delineate what. What those buckets of outperformance are? Yeah. Good morning, Neil. I'll start with a few comments and then let Kathy kind of add. On top of that, I would say early days yet, two months in, but the work of the team prior to the change in control and then what we've seen since then is extremely encouraging. As we've stated, the Pioneer assets basically delivered a record performance in the second quarter. And if you think about the context of doing that, with all the change that was going on with respect to the merger, I think a real testament to the quality of the people there and the work that they've been doing. So I'd say vectors are all pointing up, I think probably better than what we had anticipated. But I would also say it's early in the process. The teams today are working very well together, which has led to frankly identifying a lot more value opportunities than, frankly, I think either of us could see when we were on opposite sides of the fence. And now that we're together working, we see essentially a lot of opportunities to transfer the best practices of Exxon Mobil into Pioneer and likewise to transfer a number of best practices from pioneer into the ExxonMobil base, which, when you think about our size, has some tremendous leverage associated with it. And so that's all being worked through in detail. As you know, when we commit to some of our objectives, they're based by some very detailed plans that sit behind them. The organization today is working those plans. But we already see significant upside potential, not only in the magnitude, but in the pace at which we'll be able to deliver them. So I think a really positive story there. I'll let Kathy maybe add some additional details. Kathy Sure.",
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          "text": "I think one of the things we've been really pleased by is the number of learnings that we've already had from Pioneer. And so not only will we bring our technology and cube development to them, but they're bringing a bunch of learnings to us. So we're already utilizing their remote logistics operations center in our own drilling and completions operations in order to improve supply chain. They've done some things on the procurement side I'd say that we think can help us to kind of leverage up our expertise. They've been really good over the years of blocking up their acreage. So we think that's another thing that, that ultimately we can benefit from. And then as I think everyone knows, they've got a quite large water infrastructure in the Midland Basin and we'll be looking to also leverage that. So we've been really pleased with what they bring to the table. And we're off to a really good start as we look at building an integration development plan with them that fully utilizes the technology that we bring to the table. And so we're going to have a corporate plan update in December. We're going to do a spotlight on the upstream and we'll update where we're at with the synergies and how we're looking forward at that time.",
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          "text": "Yeah, I just, I guess cap it off, Neil, with you know, we said at the time we announced the acquisition that we were going to produce more barrels at a lower cost and in a more environmentally friendly way. That continues to be the case. That's obviously good for our company. But more importantly, as we said at the time, we continue to emphasize it's good for the US it's good for the US economy, it's good for the people living in the US it's good for US businesses and critically it's good for US Energy security. So I think this is, as I said at the time, going to be a win win proposition for all. All right, thank you, Darren. Thank you, Kathy. The next question is from Betty Jiang with Barclays.",
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          "text": "Darren.",
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          "text": "Kathy, good morning. Since we just talked about Permian hit on the other region that's also hitting record production. So Guyana volumes continue to exceed expectations and the FPSOs just continue to produce well above capacity. We'd love to just get an understanding of do you think this type of performance is likely to continue and does that translate relatable for what you would expect for the future projects that's yet to come. Sure, I'll take that, Betty. Thank you and good morning. Good to hear from you again. I would say, you know, what you're seeing is the collective effort of our organization focusing on what is a very high value development and making sure that we are taking advantage of all the opportunities we can find to safely grow production. And as you commented, we're seeing some significant improvements with production rates well above what we had based the investment decision on. And that's continuing across all three of them. We try to take that into account as we develop the next. And so in theory you would think we build that into the base and don't continue to see that. But frankly, our experience is telling us otherwise, which is this organization complemented by the work that we're doing with our technology organization, our global operations and sustainability organization. Every element of the organization that we have now created and functionalized is very focused on maximizing value. And so with these new organizations and that focus, they continue to find additional opportunities. So I would bet that we'll continue to see outperformance versus the basis on which we fid. But I would also tell you that every development is unique unto itself and obviously we got to get it up and running and then let the teams get after it and find the opportunities to safely increase its capacity. But I would just tell you, I would bet on our people to find that we've got a long history of doing it and it's clearly demonstrating itself with this unique and valuable opportunity here. Thank you. You bet. Thank you, Betty. The next question comes from Doug Leggett with Wolff Research. Hey, good morning. Thanks for taking my questions. Good morning, Darren and Kathy. Morning. I'm still getting used to the new moniker, Darren, but thanks for having me on. So I wonder if I could ask a question about portfolio. Now that you've got Pioneer in the door, you've had a, you know, you've got a lot of things that are perhaps you could characterize as maybe non core, a lot of tails in the portfolio. And I'm just curious, we haven't really heard much on the asset disposal front in a while. And I'm curious if now that you've got two very significant concentrated assets to a certain extent, the Permian and Guyana, what it means for the portfolio in terms of high grading opportunities going forward? I'll start with that and then I'll let Kathy add anything that she wants to. But I would say actually we've been fairly Aggressively going after the tail. You remember, I think back in 2019 we had announced that we were going to divest about $15 billion over time. Of course, we got into the pandemic and we said we're not going to, you know, this is not a forced march. We're going to basically divest when the market conditions ensure that we can realize the value that we think the assets that we are marketing can be realized. And frankly, that's what we've been doing. So as you look at where we're at to date, second quarter this year, I think we've basically gotten to the $15 billion in the upstream. And then if you look at what we've been doing in the downstream, there's another few billion dollars that we've added on top of that. So frankly, from a cleaning up the tail standpoint, we've made significant progress. Obviously there's a few more things that we're working on and we'll continue to assess every one of the assets in the portfolio, make sure that they are competitively advantaged. And frankly, as we look at new investments, we force those investments to compete on an industry wide basis and make sure their advantage versus the industry and therefore can be supply product at low cost to supply. We also do that with all of our existing assets. And if they're not competitively positioned on an industry supply curve, then the organization has two options. Either we come up with an advantaged investment that makes them more competitive and moves them to the left of the cost on the cost of supply curve, or we look to divest. And that process has been ongoing across all of our businesses. And then obviously the timing of when we then take action is a function of realizing the value that we think those divestments should bring. And we're patient, we're not going to rush that process, but I would just say staying after it, being very steady, waiting for the market to meet, to be where it needs to be in order for us to reevaluate, has paid off significantly. And basically we're delivering on what we said we were going to do and we'll continue to look at it, but I wouldn't, I don't see any big step changes here in the, in the medium term.",
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          "text": "And the only other thing I'd note, Neil, is, you know, you can see.",
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          "text": "In our cash flow bridges, Doug, sorry.",
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          "text": "I'm sorry, Doug, I'm sorry. But you can see in our cash flow bridges, you know, we're pretty consistently every quarter bringing in more proceeds from the divestments that are occurring, you know, in the first half of the year that was $1.6 billion. And then I would just note we had a lot of activity in upstream and so that generated some positive earnings for us in the quarter. And so if you look at my prepared remarks, you know, that we published earlier this morning, I talk about sort of 380 million in the upstream being kind of these other one off items. And that was a lot of earnings coming in from divestments only partially offset by the one off cost associated with Pioneer.",
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          "text": "Terrific. It would have been worse if you'd called me, Jennifer. Cathy, but thanks so much. I appreciate the time.",
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          "text": "Yeah, good, appreciate that. Sorry about that. Doug.",
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          "text": "Doug, congratulations on the new shop, new platform and to you, Jim, thanks so much. The next question is from Devin McDermott with Morgan Stanley. Hey, good morning. It's taking my question. So, Darren, you had a lot of good updates in your prepared remarks on some of the low carbon initiatives. There's been a lot of progress there, it seems, over the past few months and quarters, which is great to see. Now I think back to the corporate plan you laid out late last year. This is a growing wedge of your overall capital spending in each of the next few years. So I was wondering for some of the investment opportunities, more about what mileage you're focused on to actually allocate more capital to these areas. So what's needed to make final investment decision on carbon or move forward with carbon materials or build the scale you talked about in lithium production? Is it more commercialization, uptake, technology development, regulatory clarity, something else? Sure, yeah, you broke up just a little bit on that, Devin, but I think I got the gist of your question. If I don't hit the mark, then please steer me in a slightly different direction. I think your question around what's required to kind of continue to move along in our investments in the low carbon solution, across the portfolio of products that we've been talking about. I would just say fundamentally we expect in the low carbon businesses and in fact some of these new products that while they contribute to a lower carbon future, they also bring significant value. And in use in today's application, they have to compete in the portfolio, they have to be advantaged versus what's out there today. And they have to basically generate good returns across the commodity cycles. And so the fundamental philosophy that we've been applying in the base business also is required in these, the new businesses that we're trying to generate. So that's I think foundational. What each of and you know, Dan, Ammon in particular. But then the stuff that's coming out of the product solutions organization has also got to meet that initial hurdle. And then as you look across each of them, the hurdles to clear, to deliver on that expectation, very little bit, I would say in Dan's business with the carbon capture and storage, you know, he's, he and his team are building a brand new business. And so there are very few, I think, examples of where the company is not only developing the technology and the infrastructure and logistics system, but also developing the capacity to supply while developing the demand and developing the market in general and advocating on what I would say are the, the initial policies needed to get things kick started. So there are a lot of moving parts. I would say the broader industry and business community, I frankly haven't gotten far enough along in this to truly appreciate just how complicated it is. But I would say leveraging the capacity and capability that we've built over the decades, doing this in other parts of our company, particularly in the upstream, that we're leveraging those capabilities and making really good progress there. On the Blue Hydrogen project, you know, as we've worked through the engineering and we've got a really good line of sight to what that project can deliver, obviously a critical element of that is getting the IRA legislation translated into final regulations. And that's a process that's been ongoing. We're optimistic that the regulations will reflect the intent of the legislation. And if it does, I think we'll have a very attractive project that we can then fid here once those regulations are finalized. So I'm optimistic in that space. And as you may have seen, we just added another 500,000 tons of carbon capture and storage into Dan's portfolio. And there's a pipeline that the team continues to work. So we see continued opportunity and growth with good returns in the carbon capture side of the equation. On the lithium, same thing. While lithium is an established market, it's fairly small with respect to what its ultimate potential is. And of course we're bringing on a new production method with some new technology and so again, doing the work to understand what the investments required there are and to establish and ensure that we've got a real advantage versus what else is out there and what else needs to come on to meet the growing demand in lithium. But again, I feel good about that. We've told the team, don't, you know, we're not looking to rush this through and get something, get money spent. We're looking to make sure that we build a very strong long term foundation. So none of the work that we're doing in these new businesses is schedule driven. It's all about establishing successful long term foundations. And then maybe just briefly touch on Proxima and the Carbon Ventures, which, you know, that's a broader effort that we've been on for quite some time, which is to say leverage our technical capabilities to transform molecules and apply that to markets that exist with unmet needs. And I think we're making really good progress with Proxima. We've got some, I think, very high barriers to entry and competitive advantages there. And so I'm anxious to kind of prosecute that business and establish it as quickly as we can because we see real potential there. And same with Carbon Ventures again, leveraging our ability to transform the molecules, shape the molecules and get some structures that improve performance. Think there's a big opportunity there. But that's, you know, I would say Carbon Ventures is still early in the technology cycle, but I think we've gone far enough along to see some real opportunity there. And as I said in my prepared remarks, the challenge I've given the product solutions organization is, you know, what's a realistic but aggressive business plan look like and what would be the investment required to establish that? And that's good because it grows value today. But, but it also positions us well as those molecules become less demanded in their traditional applications, it becomes a much lower feedstock to these new applications. And so there's a lot of opportunity to diversify the slate, protect the business or diversify the business as we move through the transition. So long answer, but a lot of variables at play here, but frankly all variables that we feel very comfortable managing. And I think the progress we're making there demonstrates our capability to manage those things. Great, thanks Darren. I appreciate all the detail. Thank you. The next question is from John Royal with JP Morgan. Hi, good morning. Thanks for taking my question. So my question's on the CapEx guidance update. We see that you moved the legacy CapEx up to the top end of the prior range and then obviously you layered in Pioneer as well. But can you talk about the drivers of the legacy CAPEX bumping up to 25 billion for the year? Yeah. Good morning, John. I'll start with that and then let Kathy finish up. But so the way the reason we put a range out on the CapEx is as we, you know, we build these plans and the previous year starting around this time in the summertime and then kind of lock and load them in October and obviously there's a lot of things that develop and evolve from, you know, the middle of the previous year to as we go into this year. That range is not meant to have you guys slice it down the middle and fix on a number. The range is to say we've got optionality here and as things evolve, we may reduce some of the spending or if we find that the opportunities are panning out the way we expect, we may be on the other end. So that range is truly where we expect to be somewhere in how things evolve and what the opportunity set looks like. I mean, the key focus here is to make sure that we are investing in highly advantaged, highly profitable projects. And basically, as we worked our way from October of last year into this year, we see a lot of attractive opportunities that we continue to invest in, which puts us at the top end of that, consistent with what we understood the opportunity set could look like as we went into the plan process last year. That's why we're coming in at 25. And then of course, we're using the Pioneer number to add on top of that. But Kathy, anything to add to that?",
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          "text": "No, I would just say, obviously we have a lot of projects coming online in 2025 and the exact pace of all of those, and therefore, you know, making sure that we provide it sort of enough room, I would say, in the initial guidance supporting of all of those projects that are coming online in 2025. You know, we can't pinpoint predict all of that as we put our plans together for the year. And so, you know, just as an example, China one is a huge project. It's going to be coming online early next year as an example. So there's always a little bit of give and take, which is why we give the range to start with.",
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          "text": "Thank you. Ah, the next question is from Jason Gabelman with TD Cowan. Hey. Morning. Thanks for taking my questions. I actually wanted to follow up on the 2025 project startups that you just mentioned. And thanks for a little bit more detail on the China Chemicals complex. But as I look to the other projects coming online, I think the largest earnings contributors include the Permian crude pipeline and then in the upstream Golden Pass and then the next Guyana boat. So I was just wondering if you could provide a little more color on those projects in terms of how they're progressing and kind of phasing through the year. Thanks. So I would say consistent with the plans that we put out, the projects are all, with obviously the exception of Golden Pass, moving consistent with the plan development and the announced dates that we talked about all of them. I think we feel really good about in terms of the work that we're doing and the case for the contributions, the returns, the earnings that we expect to get out of those projects. I think we continue to feel good about underpinning all the projects is we never try to take a position on where we're going to be in the market cycle, but instead make sure that these projects, when they come on, can compete in any of the areas of the cycle. And we've actually found that if you look at the investments we've made since 2018 brought online, if you look at the aggregate return of that portfolio, it's exceeding the basis in which we fid those projects, even as we've been say in the chemical business at bottom of cycle conditions. So I think we continue to demonstrate to ourselves that the time we spend to make sure these projects are advantaged in the base case is paying off. And then of course our global project organization is really continuing to drive very effective execution of the portfolio with keeping our cost well within the FID basis and generally delivering it faster and therefore bringing more value sooner.",
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          "text": "Yeah, and I would just note it's an especially big year for our EMPS business. So you know, I already that China one, you noted a couple of projects. I mean the Singapore Rigid upgrade project is a pretty big project. You know, we have a upgrade project at Foley in order to bring on, you know, ultra low sulfur diesel. We've got the Strathcona project for renewable diesel coming online in 2025. So, you know, really big year for the AMPS business in terms of the number of projects we have coming online. And then we're going to continue to expand our advanced recycling. So we'll be adding more capacity as well next year. So you know, we note it. You know, again if you look at our IR slides, we talk about projects being a big driver of underlying earnings growth in the EMPS business and you see that supported by everything coming on in 2025.",
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          "text": "Thanks. The next question is from Biraj Borkateria with RBC. Your line is open. Please go ahead. Hi there. Thanks for taking my question. Just wanted to follow up on Jason's question and more specifically on Golden Paths. So I guess at this point are you able to confirm updated schedule guidance for the startup? And then second question is just going to some of your prepared remarks. If I think about your upstream portfolio, a lot of your growth is liquids or liquids price linked through LNG. I think you say 80% of your upstream is now linked to Liquids. So I was thinking, as you're building out your LNG portfolio and your trading function, is there any desire to diversify that sales mix a bit more or is this intentional and where you want to be? Thank you.",
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          "text": "Yeah, sure.",
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          "text": "I'll start with the last part of the question, which is it is a conscious decision to get weighted on liquid prices. And frankly, if you look at the LNG market and when you're building large LNG projects, you tend to sell those out and sign contracts in advance of the investment, which the market today is linked to oil. And so we continue to have a desire to lock in a significant portion of those developments. So we've got surety on the sales side of the equation as we bring those projects up. So my expectation is we'll continue to be weighted on that and we're very comfortable with that. In fact, there's been a huge drive since I've been in this job and brought Neil into the upstream to basically shift the portfolio and get a little heavier weighting in the oil side. As I mentioned this morning on cnbc, if you look at the oil that we're producing today, we're producing more oil than at any time since the merger of Exxon and Mobil. So that strategy is beginning to manifest itself on your golden pass the project. So we've just gotten through, reached the venture, just reached a settlement with Zachary. And so that venture is in the process of kind of restaffing and getting started back up again. Obviously we're in the very early days of that, so there's still more work to be done. And of course the teams are very focused on getting back to work, effectively executing and bringing that project in as quickly as they can and as close to the original schedule as they can. Right now our estimate is we're going to see about a six month slippage. So we had anticipated kind of first LNG the middle of next year. We now are looking at probably the back end of 2025 for first LNG and that's kind of where the current schedule is. But I would just condition that with the teams are just getting back up and running and you know, they have a clear mandate to try to bring that in as effectively as they can. And my again, my expectation is they'll do better than we currently think, but we've got work to do. Understood. Thank you very much. Thank you, Rosh. The next question is from Steven Richardson with Evercore.",
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          "text": "Hi.",
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          "text": "Thank you. I was wondering if we could circle back. I appreciate all the conversation about projects and project execution and how you've got a number of of really important and interesting projects coming on in the downstream in short order. Just wondering. You've added seemingly quite a bit of length to your upstream portfolio over the last number of years. And as you think out beyond 26, 27. Darren, are the teams continuing to bring you new and interesting projects in EMPs, and do you think continuing that kind of pace of integration out in the plan horizon is still interesting?",
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          "text": "Maybe you could just talk about that.",
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          "text": "In terms of the investment mix and.",
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          "text": "The opportunities and maybe address EMPs and chemicals as well.",
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          "text": "Sure. No, I appreciate the question, Steve. I think you touched on a really important point. I think one of the advantages of the restructuring that we've done is we no longer identify our business with the products that we're making. So if you go back in time, the functional organizations that we established, we had refining organization that was producing refining products and we had a fuels marketing organization that was marketing fuels and we had a chemical company that was marketing chemicals. We've now combined all that into a product solutions organization which is supported by a technology organization, which again is not organized around any of our heritage businesses or heritage products, but instead is organized around core capabilities, core technical capabilities to deliver value to the businesses that they support. So while it may not be intuitively obvious that change in structure and the way we think about and talk about the business has also opened up a lot of white space in terms of the challenge here is how do we take our core advantages, core capabilities? Some of it includes our existing footprint, but a lot of it includes our ability to upsell and to identify value and use applications and combine that with a technology organization that's very focused on applying core technology capabilities to business challenges and business opportunities, which is starting to unlock applications that frankly in the past wouldn't have been identified because they didn't fit in the context of the organizations that we had in place. But today the aperture is much broader and the playing field is much bigger. And so we see that with Proxima and Carbon Ventures. My expectation is as we go forward, we'll continue to talk about those markets and we'll talk about the applications that we're developing. And the technology organization is continuing to look at how else can we use our capabilities and manipulating the molecules, and particularly hydrogen and carbon molecules, to make products that society needs and at the same time reduce emissions. So I think that organization has been given a license, a hunting license, to go out and find how we can lean into and create more value out there. And grow earnings. So my expectation is, as we go forward well beyond the 2027 timeframe, we're going to continue to bring in opportunity sets as we unlock them through the work of both our product solutions organization, but also also our technology organization. Then, of course, we can take advantage of our projects organization to then go off and build these things at scale and do it at a lower cost than anybody else. So I think there's a really powerful combination there. And our horizon extends well beyond the 2027 in terms of thinking through the pipeline and making sure that we're positioned to be successful well into the future. And I would just quickly add then. And that's true for Product Solutions, which has got the chemical portfolio, our specialty portfolio, and then what I would say are the energy portfolio, but more specifically the molecules that go into energy that we expect to become feedstocks of the future like they are today for our carbon ventures and Proxima Ventures on the upstream side, we've got a lot of obviously, growth potential through the, the back end of this decade. But we, you know, this is a depletion business. We recognize that. And so that organization continues to look well beyond the 2027, 2030 time horizon, making sure that we have got a good understanding of what it's going to take to keep that pipeline full. So I feel really good about that. I think the way we've organized the businesses and the central organizations that we've put in place to serve those businesses is going to have huge payoffs here in this space. The next question is from Roger Reed with Wells Fargo. Yeah, thank you. Good morning. Since y'all have probably the most geographically diverse set of operations of anyone we cover, I was just curious. You know, the most recent news this morning shows maybe a few cracks in the economy. If you could kind of give us an idea as you look across the products and the chemicals side, thinking, you know, that's where we really see the demand parts. What you're seeing, you know, kind of, let's say, China back around to our side of the globe. Sure. Good morning, Roger. I think the key message I would leave you with across our businesses, when you look at kind of pricing and margins, is there's two pieces, two halves to the equation. There's the demand side and there's the supply side. On the demand side, frankly, to start with chemicals, we see the demand basically returning to the kind of growth that we've seen prior to the pandemic, so basically growing at 1 to 2% above GDP. And so that's Back on track from a growth standpoint, certainly that's what we're seeing the first half of this year. The challenge in that business with the margins has been frankly from the supply side of the equation with a lot of capacity coming on and a queue of capacity yet to come on. And so that's been more of the story in chemicals, less of a demand and growth story and more of a supply story and a lot of supply coming on in the short term. And like the past, the challenge in the chemical business, given the large chunks of capacity that come on in discrete times, that you've got to grow through that capacity to get your margins back up again. One of the reasons why we stay so very focused on low cost of supply, feed advantage and importantly performance products is to make sure that we've got advantages above and beyond the commodity cycle. And you see that playing out now in our chemical business with earnings that frankly are well above what would be expected given the challenging market conditions that we see in the margin environment. China is growing, you know, despite maybe some of the. It's not growing at the rates that we've seen historically, the very high rates, but it's still growing at a, at a healthy, healthy clip. And as you come around to the US we're seeing kind of reasonable economic conditions and growth in the US as well. Europe, I think, is probably the most challenged area of the globe. And frankly, with some of the policies we see Europe implementing, my expectation is it becomes even more challenging, quite frankly, and unfortunately particularly unfortunate for the folks living in Europe given the, I think the drag that the policy they're putting in place is going to put on their economy. I think China's looking reasonable. India is growing and looks very, very healthy. The US is looking reasonable with good growth. Demand for on the energy side of the equation with petroleum products continues to be very high record levels of demand around the world. And again, I think very good supply coming into the equation there, which is keeping, you know, has brought margins from those very high levels that we've seen in the first quarter and then back into to last year. We're now getting back down into more typical ranges. And frankly, all of our plans anticipated that. It's always difficult to call the timing of it, but we certainly knew that the elevated margins that we were seeing in the refining business would ultimately come back into normal ranges. My expectation going forward then is we'll continue to see what I would say is historical volatility levels in that we'll see times when the margins spike and we'll see times when the margins are challenging. But again we built our refining business to be robust to those. And if you look at the work we've been doing to high grade that portfolio, we've taken out a lot of the low margin, less advantaged refineries and are now focused on the integrated refineries that have a mix of high value products that we're producing and are advantage from a size and scale and cost standpoint. And then on the gas side of the equation and the oil side of the equation, oil demand continues to be at record levels. Last year was a record. We anticipate this year will be a record and then next year will be a record. So demand continues to be fairly healthy from an oil standpoint. It's just a question of working through the supply that's coming on most of that led by what's happening in the Americas and then on gas that's going to continue to grow in demand. And it's another again a function of the capacity that's coming on. So I think good news is we're seeing the industry be very responsive to the demand and frankly it's very consistent with the foundation of the strategy that we put together which is you got to be low cost, you got to be on the left hand side of.",
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          "text": "The cost of supply curve.",
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          "text": "Thanks Roger. The next question is from Josh Silverstein with ubs. Thanks Darren. And Kathy, you continue to make good progress on the cost savings front. It looks like there was an uptick of about $600 million sequentially. It looks like you called out kind of a $200 million turnaround savings in energy products. I just wanted to see if you could provide some more examples of what's driving the improvement and how you take the current kind of 10, 7 to the 15 billion over the next few years. Thanks.",
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          "text": "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 tax basis for the year to date where our structural cost savings is about a billion dollars. 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, that you mentioned, you Know, we're also obviously driving savings in terms of supply chain, you know, 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're 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're going to continue to see on a go forward basis. And then I would say longer term, as those centralized organizations start to standardize processes for the company, which you know, are quite disparate as we sit here today, we'll be able to apply more technology to get, I would say, even more automated in the things that we do, which will drive further efficiencies for us long term. So, you know, whether it's getting more efficient on logistics or getting more efficient because, you know, we're standardizing now between ourselves and Pioneer, standardizing all the materials and things that we're buying, those are the types of 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 develop. So we're feeling good about the progress we're making. And that overall target to get to $15 billion in savings between 2019 and 2027.",
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          "text": "Yeah, I would just, I guess one other way to think about it, Josh, is, you know, for the first time in the history of our corporation, we've organized ourselves to take, to focus on every aspect of delivering the business, irrespective of what that business is looked at, where the synergies exist and are now taking the experience, the collective experience of the corporation and the expertise in each of those areas and focusing it on, on an opportunity set. So the size of our business gives us a huge advantage here. And so a lot of these things you're seeing are accruing by basically taking the best thinking that had occurred around the organization around the world, and then applying that uniformly everywhere it's relevant. And that's happening time and time and time again. And so I think a very unique capability and capacity that, that frankly others can't match. And the benefits are showing up in these structural cost savings for sure. Also Showing up on the revenue side of the equation with respect to better marketing, better ability to sell into value. So there's, I think, huge benefit to the changes we've been making. We have time for one more question. Our final question will be from Bob Brackett with Bernstein Research. Good morning. I'd like to paraphrase a comment Darren made that lithium complexity is misunderstood by the industry and I'm intrigued. Is that a comment around the marketing and the relative youth of the downstream side, or is it a comment around maybe the upstream and the complexity of processing? Good morning, Bob. Yeah, that comment I meant to imply for more broadly the whole low carbon solutions business set, where as you look at each of those businesses, they've got their unique set of complexities. For lithium in particular, you're taking what is essentially a brand new technology, marrying that with some established technologies for subsurface, some established technologies above surface, consistent with our processing experiences and refining and chemicals. And so putting those things together in a new business to make a product. I wouldn't say has complexities that people can't comprehend. I would just say they're new and there haven't been very many people who have worked their way through that. Where some really unique challenges are, is in building brand new value chains and the carbon capture market as an example, where there's just, there's not an existing market today that pays for, for carbon removal that's being incentivized with government policy. Government policy is forming while at the same time you're trying to build the infrastructure to support that market, the logistics, the supply, and then at the same time develop a customer base. And so the complexity that I see in the low carbon space, that's a particularly challenging one because of all the moving parts and all the work that has to be done to try to piece those things together, to come up with frankly a business and business model that one, is sustainable for the long term and two, that generates returns that are competitive in the portfolio. But I have to say we're geared to do that kind of work. Our experience lends itself to that. And frankly, what Dan and the team is accomplishing, leaning on a lot of the core capabilities of the organization, we're tackling those challenges and making really good progress. I think on the hydrogen side of the equation, there's not a, a real vibrant market or a strongly economic market for a low, virtually carbon free hydrogen. So that's being developed. Obviously the government incentives are supporting that in the short term, but we've got to work our way to a market driven forces so that we are competing in an open market and not relying on government subsidies. So that's, I think one of the challenges in that space. But I think my comment was more generally that there's a lot of optimism around the low carbon businesses in general. But if you think about where progress has been made to date, most of that's been in the wind and solar and EV areas and all those are playing into well established markets. Power generation market is very well established. The automotive industry is very well established. Now they're bringing in new technology that have some of their own unique challenges, but they're not building brand new markets. In our case, in some of the businesses we're building brand new markets. Yeah, that's very clear. Thanks for that. You bet. Good talk to you. Thank you, Bob.",
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          "text": "And thanks everybody for joining the call.",
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          "text": "And for your questions. We're going to post the transcript of this call to the Investors section of our website by early next week. But before we wrap, I want to draw your attention to a couple of topics. First, a reminder. Later this month we will be issuing our annual Global Outlook, which includes our latest views on energy demand and supply through 2050 and which forms the basis.",
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          "end_time": "00:58:12,538",
          "text": "For our business planning.",
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          "text": "And second, please mark your calendars for our Corporate Plan Update and Upstream Spotlight, which is going to be on Wednesday, December 11th. And for more information on that, again, please see the Investors section of our website with that, have a nice weekend and I'll turn it back to the operator to conclude. Thank you. This concludes today's call. We thank everyone again for their participation. You may disconnect at this time.",
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  {
    "call_id": "675299f52d72ce0001ccd19a",
    "call_title": "MTN Conference Call",
    "symbol": "MTN",
    "start_time": "2025-01-08T18:59:01Z",
    "end_time": "2025-01-08T18:59:07Z",
    "duration": 0,
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    "created_at": "2025-01-08T18:59:01.470991Z",
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      "call_id": "675299f52d72ce0001ccd19a",
      "text": " Good afternoon ladies and gentlemen. Welcome to the Vail Resorts fiscal first quarter 2025 earnings conference call. Today's conference is being recorded. Currently all callers have been placed in a listen only mode and following management's prepared remarks, the call will be opened up for your questions. If you would like to ask a question at that time, please press star1 on your telephone keypad. If you need to remove yourself from the queue, press Star two. To get to as many questions as time permits, we ask that you please limit yourself to one question and one follow up at any time. If you should need operator assistance during the call, please press Star zero. I'll now turn the call over to Kirsten Lynch, Chief Executive Officer of Vail Resorts. Ms. Lynch, please go ahead. Thank you. Good afternoon everyone. Welcome to our fiscal 2025 first quarter earnings conference call. Joining me on the call this afternoon is Angela Korch, our Chief Financial Officer. Before we begin, let me remind you that some information provided during this call may include forward looking statements that are based on certain assumptions and are subject to a number of risks, uncertainties as described in our SEC filings and actual future results may vary materially. Forward looking statements in our press release issued this afternoon along with our remarks on this call are made as of today, December 9, 2024 and we undertake no duty to update them as actual events unfold. Today's remarks also include certain non GAAP financial measures. Reconciliations of these measures are provided in the tables included with our press release which along with our Quarterly report on Form 10Q were filed this afternoon with the SEC and are also available on the Investor Relations section of our website@www.vailresorts.com. with that said, let's turn to our fiscal 2025 first quarter results. Resort reported EBITDA was consistent with the prior year driven by growth in our North American summer business from increased activity, spending and lodging results. This growth was offset by a decline in resort reported EBITDA of $9 million compared to the prior year from our Australian resorts due to record low snowfall and lower demand cost inflation, the inclusion of Crown Montana and approximately $2.7 million of one time costs related to the two year Resource Efficiency Transformation Plan and $0.9 million of acquisition and integration related expenses. Moving on to our Resource Efficiency Transformation Plan Regarding the Company's two Year Resource Transformation Plan which was announced last quarter, Vail Resorts continues to make progress against the plan. The two Year Resource Efficiency Transformation Plan is designed to improve organizational effectiveness and scale for operating leverage as the company grows globally through scale of operations, global shared services, and expanded workforce management. The company expects $100 million in annualized cost efficiencies by the end of its 2026 fiscal year. We will provide updates as significant milestones are achieved. Turning now to our 20242025 North American season Pass Sales and Early Season Indicators, Our season pass sales highlight the compelling value proposition of our past products and our commitment to continually investing in the guest experience at our resorts. Over the last four years, past product sales for the 20242025 North American ski season have grown 59% in units and 47% in sales dollars. For the upcoming 20242025 North American ski season, past product sales through December 3, 2024 decreased approximately 2% in units and increased approximately 4% in sales dollars as compared to the period in the prior year through December 4, 2023. This year's results benefited from an 8% price increase, partially offset by unit growth among lower priced Epic Day Pass prices products. Pass product sales are adjusted to eliminate the impact of changes in foreign currency exchange rates by applying an exchange rate of 0.71 cents between the Canadian dollar and the US dollar in both periods. For Whistler Blackcomb Pass sales for the period between September 21, 2024 and December 3, 2024, pass product sales trends improved relative to the past product sales through September 20, 2024 with unit growth of approximately 1% and sales dollar growth of approximately 7% as compared to the period in the prior year from September 23, 2023 through December 4, 2023 due to the expected renewal strength, which we believe reflects delayed decision making. Our North American pass sales highlight strong loyalty with growth among renewing passholders across all geographies. For the full selling season, the company acquired a substantial number of new passholders. However, the absolute number of new guests was smaller compared to the prior year driven by the overall unit driving the overall unit decline for the full season. New passholders come from lapsed guests, prior year lift ticket guests, and new guests to our database. The company achieved growth from lapsed guests who previously purchased a pass or a lift ticket but did not buy a pass or lift ticket in the previous season. The decline in new passholders compared to the prior year was driven by fewer guests who purchased Lyft tickets in the past season and from guests who are completely new to our database, which we believe was impacted by last season's challenging weather and industry normalization. Epic Day pass products achieve unit growth driven by the strength in renewing passholders. We expect to have approximately 2.3 million guests committed to our 42 North American, Australian and European resorts in advance of the season in non refundable advanced commitment products this year which are expected to generate over $975 million of revenue and account for approximately 75% of all skier visits, excluding complimentary visits. Now turning to our early season indicators heading into the 20242025 ski season, we are encouraged by our strong base of committed guests providing meaningful stability for our company. Additionally, early season conditions have allowed us to open some resorts earlier than anticipated, including Whistler, Blackcomb, Heavenly, Northstar, Kirkwood and Stevens Pass. Early season conditions have also enabled our Rockies resorts to open with significantly improved terrain relative to the prior year, including the opening of the legendary Back Bowls at Vail Mountain opening the earliest since 2018. Our resorts in the east are experiencing typical seasonal variability for this point in the year with all resorts planned to open ahead of the holidays. We are continuing to hire for the winter season and are on track with our staffing plans and have achieved a strong return rate of our frontline employees from the prior season. Lodging bookings at our US Resorts for the upcoming season are consistent with last year at Whistler Blackcomb. Lodging bookings for the full season are lagging prior year levels which may reflect delayed decision making following challenging conditions in the prior year. Now I would like to turn the call over to Angela to further discuss our financial results and fiscal 2025 outlook. Thanks Kirsten and good afternoon everyone. As Kirsten mentioned, this quarter's results were driven by growth in our North American summer business offset by lower results from our Australian resorts cost inflation, the inclusion of Kron Montana, the one time cost related to the two year Resource Transformation Plan and acquisition and related integration related expenses. Net loss attributable to Vail Resorts was $172.8 million for the first quarter of fiscal 2025 compared to a net loss attributable to vail resorts of $175.5 million in the same period. In the prior year resort reported EBITDA loss with $139.7 million for the first quarter of fiscal 2025 which included $2.7 million of one time cost related to the previously announced two year resource transformation plan and $0.9 million of acquisition related in integration related expenses compared to a resort reported EBITDA loss of $139.8 million for the first quarter of fiscal 2024 which included 1.8 million of acquisition and integration related expenses as of October 31, 2024. The Company's total liquidity as measured by total cash plus revolver availability was approximately $1 billion. This includes $404 million of cash on hand, $620 million of total combined revolver availability and as of October 31, 2024, the Company's net debt was 2.8 times its trailing twelve months total reported EBITDA Regarding the return of capital to shareholders, the Company declared a quarterly cash dividend of $2.22 per share of Vail Resorts common stock payable on January 9, 2025 to shareholders of record as of December 26, 2024. In addition, the Company repurchased approximately 115,000 shares during the quarter at an average price of approximately $174 for a total of $20 million. The company has 1.6 million shares remaining under its authorization for share repurchases. We will continue to be disciplined stewards of our shareholders capital, prioritizing investments in our guest and employee experience, high return capital projects, strategic acquisition opportunities and returning capital to our shareholders. The Company has a strong balance sheet and remains focused on returning capital to shareholders while always prioritizing the long term value of our shares. Now turning to our outlook for 2025, the company's resort Reported EBITDA guidance for the year and ending July 31, 2025 is unchanged from the prior guidance provided on September 26, 2024. The Company is updating its guidance for net income attributable to Vail Resorts, which it now expects to be between $240 million and $316 million, up from the prior guidance range of $224 million to $300 million. The primary difference is due to a $17 million increase from the gain on sale of real property related to the resolution of the October 2023 Eagle County District Court final Ruling evaluation regarding the Town of Vail's condemnation of the Company's East Vail property that was planned for Vail Resort's incremental Affordable Workforce Housing Project, a transaction that has been recorded as real Estate Reported ebitda. Additionally, the guidance is updated to include a decrease in expected interest expense of approximately $2 million, which assumes that interest rates remain at current levels for the remainder of fiscal 2025. These changes have no impact on expected resort reported EBITDA. The company continues to expect Resort Reported EBITDA for fiscal 2025 to be between $838 million and $894 million, including approximately $27 million of cost efficiencies and an estimated $15 million in one time cost related to the multi year Resource Efficiency Transformation Plan and an estimated $1 million of acquisition and integration related expenses specific to Crown Montana as compared to fiscal 2024 the fiscal 2025 guidance includes the assumed benefit from a return to normal weather conditions after the challenging conditions in fiscal 2024, more than offset by a return to normal operating costs and the impact of continued industry normalization impacting demand. Additionally, the guidance reflects the negative impact from the record low snowfall and related shortened season in Australia in the first fiscal quarter of 2025 which negatively impacted demand and resulted in a $9 million decline of resort reported EBITDA compared to the prior year period. After considering these items, we expect resort reported EBITDA to grow from price increases in ancillary spending, the Resource Efficiency Transformation Plan and the addition of Cron Montana for the full year. The guidance also assumes a continuation of the current economic environment, normal weather conditions for the 2024, 2025 North American and European ski season and the 2025 Australian ski season and the foreign currency exchange rates as of Our original fiscal 2025 guidance issued September 26, 2024, Foreign Currency Exchange rates have experienced recent volatility relative to the current guidance. If the currency exchange rates as of yesterday December 8, 2024 of $0.71 between the Canadian dollar and US dollar, $0.64 between the Australian dollar and US dollar and $1.14 between the Swiss franc and the US dollar were to remain at those levels for the remainder of the fiscal year, the Company expects this would have an impact on fiscal 2025 guidance of approximately negative $5 million for resort reported EBITDA. Now I'll turn the call back over to Kirsten. Thank you, Angela. Vail Resorts is committed to enhancing the guest experience and supporting the Company's growth strategies through significant capital investments. For calendar year 2025, the company plans to invest approximately $198 million to $203 million in core capital before $45 million of growth capital investments at its European resorts including $41 million at Andermatt Cedron and $4 million at Crown, Montana and $6 million of real estate related capital projects to complete multi year transformational investments at key base areas at Breckenridge Peak 8 and Keystone River Run and planning investments to support the development of the West Lion's Head area into a forest based village at Vail Mountain. Including European growth capital investments and real estate related capital, the Company plans to invest approximately $249 million to $254 million in calendar year 2025. Projects in the calendar year 2025 capital plan described remain subject to approvals. In calendar year 2025, the company will embark on two multi year transformational investment plans at Park City Mountain and Vail Mountain. At Park City Mountain, the transformation of Park City Mountain's Canyons Village is underway to support a world class luxury based village experience. These investments will support Park City Mountain in welcoming athletes and fans from across the world who visit the resort as it serves as a venue for the 2034 Olympic Winter Games. As announced in September, we are replacing the Sunrise Lift with a new 10 person gondola in partnership with the Canyon Village Management association in calendar year 2025 which will provide improved access and and enhanced guest experience for existing and future developments within Canyons Village. The Company also plans to enhance the beginner and children's experience by expanding the existing Red Pine Lodge restaurant to upgrade the dining experience for ski and ride school guests and by improving the teaching terrain surrounding the Red Pine Lodge. These investments are further supported by the construction of the Canyons Village Parking garage, a new covered parking structure with over 1,800 stalls being developed by TCFC, the master developer of Canyons Village, which is expected to break ground in spring 2025, planning of additional investments at Park City Mountain across the mountain experience is underway and additional projects will be announced in the future. At Vail Mountain, the Company previously announced the development of the West Lion's Head area into a fourth base village at Vail Mountain in partnership with Vail and East West Partners. The new base village will reinforce Vail Mountain status as a world class destination and is anticipated to feature access to the resort's 5,317 acres of legendary terrain plus new lodging, restaurants, boutiques and skier services as well as community benefits such as workforce housing, public spaces, transit and parking. In addition, the Company is developing a multi year plan to invest in base area improvements, lift upgrades and across the beginner ski and ride, school and dining experiences. In calendar year 2025, the company is planning to renovate guest rooms and common spaces at its luxury Vail hotel, the Arabelle at Vail Square. Additionally, in calendar year 2025, the company plans to invest in real estate planning to develop the West Lion's Head area. In addition to embarking on two multi year transformational investment plans, the Company is planning significant investments across the guest experience. In calendar year 2025. At Andermatt Cedroon, the company plans to replace the four person fixed grip palm lift and the four person fixed grip QAM lift with two new six person high speed lifts that will increase capacity and significantly improve the guest experience at the Valval area. The Company also plans to upgrade and expand snowmaking infrastructure at the Gemstock area on the western side of the resort to enhance the consistency of the guest experience, particularly in the early season and significantly improve energy efficiency. In addition, the Company plans to complete the previously announced upgrade of the Cedroon Milates snowmaking infrastructure and improvements to the Milates and Nochen restaurants. Through calendar year 2025. Vail Resorts will have invested approximately 50 million of the total 110 million Swiss francs capital that was invested as part of the purchase of the Company's majority ownership stake in Andermatt Cedrin. At Perisher in Australia, the Company plans to replace the Mount Perisher double and triple chairs with a new six person high speed lift following the capital spending in calendar year 2024 that is continuing into calendar year 2025 to be completed in time for the 2025 winter season in Australia. In addition, the Company is continuing to invest in innovative technology to enhance the guest experience. In the coming year the Company will be investing in additional new functionality for the My Epic app, including new tools to better communicate with and personalize the experience for our guests. The Company will also be building on the pilot of My Epic Assistant, a new guest service technology within the My Epic app powered by advanced AI resort experts at four resorts for the upcoming 20242025 ski season. The Company is planning to invest in more advanced AI capabilities in calendar year 2025 to support the dining experience. The Company plans to invest in physical improvements to dining outlets at its largest destination resorts to improve throughput. The company is also continuing to invest in waste reduction and emissions reduction projects across its resorts to achieve its goal of zero net operating footprint by 2030. At Breckenridge, the Company is making real estate related investments to complete the multi year transformation of the Breckenridge Peak Gate base area where the company has enhanced the beginner and children's experience and increased uphill capacity with the introduction of a new four person high speed five chair, new teaching terrain and a transport carpet from the base making the beginner experience more accessible. At Keystone, the Company is investing in acquisition and build out costs for skier services that will reside in the newly developed Kindred Resort at Keystone, a family friendly luxury Ski in, Ski out Lodging Residence and Rock Resorts branded hotel at the base of the River Run Gondola including new restaurants a full service space, spa, pool and hot tub facilities and the new home for the Keystone Ski and Ride School and a retail and rental shop. The Kindred development follows the transformational lift serve terrain expansion project in Bergman bowl, increasing lift served terrain by 555 acres with the addition of a new six person high speed lift which was completed for the 2023-2024 North American Ski season. In addition to the investments planned for calendar year 2025, the company is completing significant investments that will enhance the guest experience for the upcoming 2024, 2025 North American and European ski season. As previously announced, the Company expects its capital plan for calendar year 2024 to be approximately $189 million to $194 million, excluding $13 million of incremental capital investments in premium fleet and fulfillment infrastructure to support the official launch of Myopic gear for the 20242025 winter season at 12 destination and regional resorts across North America, $7 million of growth capital investments at Anderman Sidroon, $2 million of maintenance and $2 million of integration investments at Crown Montana and $3 million of of reimbursable capital. Including these one time investments, the Company's total capital plan for calendar year 2024 is now expected to be approximately $216 million to $221 million. In closing, I would like to thank all of our team members, especially our frontline teams across all of our mountain resorts for their passion, hard work and commitment to creating an experience of a lifetime for our guests. The guest experience that our employees create is our mission as a company and is core to our success. We all look forward to welcoming guests to our mountain resorts this winter season. At this time, Angela and I will be happy to answer your questions. Operator, we are ready for questions. Certainly, Ms. Lynch. Ladies and gentlemen, at this time, if you wish to ask a question, Please please press star1 on your telephone keypad. You may remove yourself from the queue by pressing Star two again. Please limit yourself to one question and one follow up. We'll go first to Sean Kelly with Bank of America. Hi, good afternoon everyone. Hi Kirsten and Angela. Maybe if we could just start. I'm kind of curious. Obviously the season is off to a very good start on the weather front. It sounds like. And built into the guidance is some behavioral normalization that you've called out a number of times. Can you just give us your sense on kind of what you're seeing so far? I know it's extremely early and early season visit patterns don't always reflect the destination guest. But just what are you seeing so far in terms of kind of behavior for the resorts that are open? Kind of how are you feeling about just that activity level thus far, given what you can see through Thanksgiving? Thanks for the question, Sean. I think a couple of indicators to look at. One is pass sales. Obviously we're very pleased with the outcome of our pass sales and the improvement in the growth rates in the final selling period to get to 2% decline in units and up 4% in sales dollars. So that's over 2.3 million guests that are committed coming to our resort. So that's a strong indicator for us. The early season conditions are very encouraging and especially being able to open some of our resorts. The other indicator is lodging that we're looking at and us lodging in the market data in the markets where our resorts are we see are consistent. The lodging booking data is consistent with prior year levels for the full season, better than pre Covid levels. And then Whistler Blackcomb, as I mentioned in the opening remarks, those bookings are lagging prior year and pre Covid levels. Our owned and operated lodging, we have more recent data on that and we are seeing that slightly above prior year. And all of those indicators seem to be improving as we're getting closer to the season. But we're really looking at all of that in totality. The strong conditions where we landed on pass sales and then the lodging indicators. So as a result, we are holding guidance at this time. Fantastic. And then maybe just as my follow up, Whistler's come up in a couple of the conversations and questions since the release, could just talk about the sort of overall exposure there if that were to stay where it's at, is that enough to be a risk to guidance? Or when you kind of put all those other pieces in, and especially if the snow conditions remain where they are, is there enough local visitation and other things that offset that? And that's not something we need to be overly worried about at this point in the season. When I look at the Whistler Blackcomb lodging data, I think what we see is that it continues to be improving. So I think given the strong conditions, I think it's possible what we're seeing in the bookings is some delayed decision making, which you obviously thought in total for our past sales is our trends improved as we went through the selling cycle. The conditions are off to a really great start. The terrain that we have is off to a great start. Destination guests are very important to that resort and the outcomes associated with that resort. So we'll continue to monitor and do everything we can to encourage visitation to the resort. So nothing to be, I would say, concerned about right in this moment. Just a mix of indicators coming off of I think a really tough year at Whistler Blackcomb last year. So the fact that there could be some delayed decision making going on where people want to wait and see how the season starts there, I think makes sense and we'll hope to see that play out as the season moves along here. Perfect. Thank you so much. Thank you. We go next now to Jeff Stanchel at Stifel. Good afternoon. Keir Sant Angelo, thanks for taking our questions starting off, I was hoping maybe just to expand upon hearing your answer to Sean's first question and more specifically, narrow in a little bit on what you're seeing in terms of lodging bookings indicators specifically for the Christmas and the New Year's holiday period. And as a corollary to that, have you seen sort of the bookings trends or the bookings pace accelerate in those markets that have experienced, we'll say, some favorable early season snowfall? Have you seen the bookings pace accelerate in those markets for that holiday period? Thank you, Sean. Hi Jess, thanks for the question. As we track the market data for our resorts in the US as well as the market data for Whistler and then we look at our owned and operated, we are consistently seeing as time moves closer here to the season that there are improvements in the bookings in total for the market data for our US Resorts we are seeing above pre Covid in occupancy or bookings and pretty consistent with prior year. I think we've seen those improvements also happening during the key holiday periods. And then our owned and operated, I would say because we have more visibility to that data more recent versus the market data that gets published to us when we look at owned and operated, I just want to remind you our owned and operated is a pretty small percentage of the lodging. So it's a directional indicator. It continues to reinforce, Jeff, what we see, which is those booking patterns seem to be strengthening as we get closer and as people are seeing the snow conditions are strong. So yes, we are definitely seeing it moving in that direction and hope to see that momentum continue. Okay, great. That's helpful. Thank you for that, Kirsten. And then for my follow up turning over to capital allocation. If I bridge down from your net income guidance to what we think you should do in free cash flow this year, by my math, your current dividend policy assuming unchanged, implies about 80 to 90% payout from discretionary free cash flow. Assuming that is accurate, can you just expand a little bit on your philosophy or your willingness to tap into your balance sheet should you see another year of challenging weather conditions and that drive the payout level potentially north of 100%. And sort of in a similar vein, how should we think about your dividend growth strategy just in light of the post Covid normalization trend that you've been talking about that maybe wasn't fully understood or appreciated looking back one or two years ago. And that's all for me. Thanks, Jeff. It's Angela. I'll take this one. And yeah, we always look at our dividend and really all of our capital allocation alternatives. We're constantly looking and reevaluating that. What you saw us do, right, for this quarter is announce our investment in the guest experience and investment in our resorts, which we've consistently done. And for return of capital, right. We've, we have been prioritizing the dividend and even in a year like last year where we did miss our original guidance. Right. We still were able to cover our dividend payout and pursue all of our capital allocation priorities. So we feel very comfortable. We reaffirmed and announced our dividend stayed at the same level. We typically look at our dividend in the March quarter and we'll continue to reevaluate it though, every quarter. Thanks. Great. That's helpful. Thank you for that, Angela. I'll pass it on. Thank you. We go next now to Megan Clapp with Morgan Stanley. Good afternoon. Thanks so much. Wanted to shift a little bit to past sales. Obviously encouraging to see things improve a bit, especially that positive unit growth here in the most recent period. And you did give a lot of color in the prepared remarks that sales. Trends improved due to the expected renewal strength. So maybe can you just give a. Little bit more around that was it. That renewals were just a little bit. Better than you were expecting and you. Spoke to some positive cadence, I think when you were answering a question earlier. So how much do you think was driven by that, by the early openings at some of your resorts? And any commentary around just more around. The composition of the better than expected. Pass sales in the last period would be great. Thanks, Megan. Sure. I'm happy to give a little more context on pass sales. We're very pleased with the outcome of the results on pass sales. The results that what we saw a couple of dynamics. One is very strong loyalty. So our renewing passholders, we saw growth among our renewing passholders and that growth was across all of our geographies, we also saw the majority of those renewers actually renewing into the exact same path as we had expected, which we think is a very positive dynamic as well on the new side. I talked about this a little bit in the prepared remarks. New passholders. We acquired a substantial number of new passholders. They come from three different, primarily three different sources. And there's different dynamics in each one of those. There's lapsed guests. So people who have come to our resorts in the past, but not this past year. And we saw growth converting those guests into new passholders for this coming season. Where we saw the decline year over year was on prior year lift ticket guests, which I have talked about in prior earnings calls, which was really just driven by the size of that audience being smaller after very tough weather season and industry normalization. And then prospect guests, which is basically people who are new to our database who we've not seen in our database before. That the number of those passholders also was down versus prior year. We did see strong price realization, which I'm really pleased to see. And then this last dynamic that I'll highlight is delayed decision making. I think if you look through the cadence of our selling cycle this year, we definitely saw renewers as well as new guests delaying decision making later into the selling cycle cycle which impacted and we talked about on some of the prior earnings calls did impact the cadence of when the results came in and why between September and December we saw the improvement in the growth rates during that late part in the selling cycle. Okay, great. Thanks, Kristen, that's helpful. Just as my follow up, can you talk a little bit about the my epic year rollout and how the uptake. Of that was relative to your expectations. I understand it's not a full rollout yet, but would just be curious to kind of hear any early commentary on. Uptake and how that makes you think. About your expectations for ancillary in the upcoming season. Yes, thanks for the question. We continue to be very excited about my epic year. I would say it's very early. I mean it's not a, you know, a pass type of business where all of it is committed in advance. So it's very early in the selling cycle. We are launching year one at 12 different resorts with some limitations so that we can make sure we scale the business appropriately. So nothing really substantial to report in terms of results because it's so early in the selling cycle for that experience. I think in March we will have a more robust update to shares. We'll have a Much better idea of the experience our guests had, the number of members that subscribe to the service. I think we'll have more details share with you in March. It's just a little too early right now. Okay, understood. Thank you. Thanks, Megan. Thank you. We go next now to David Katz with Jefferies. Hi everyone. Thanks for taking my questions. Appreciate it. Can we just go double back to the guidance one more time, apologize if we're beating this a little bit. But with, with the stronger start to the year and you know, perhaps, you know, maybe some of the Australian season there, can we just sort of walk through the puts and takes and how you're thinking about the rest of the year? Are, you know, are you expecting weather to normalize at the results that at the resorts that have started off strongly, are you expecting others to improve? What are the pluses and minuses as we kind of unpack the guidance? Thanks, David. I think a couple of things for us to think about. First is both our Q1 results and our past sales results were generally in line with our expectations. We, number one, number two, we have strong early season conditions as we talked about in the Rockies, the West, So I think we're in a really good position heading into the season. And then third is we're looking at lodging bookings and the trend on lodging bookings and where we stand on lodging bookings in our US Resort markets as well as Whistler Blackcomb, our largest resort, the lodging bookings there. So it just point it's pretty early in this season. We're looking at all of those factors. The season's just begun and you know, hoping for a strong season but not changing our guidance based on the mix of indicators that we have right at this point, we still have a significant part of our season ahead of us. I understood. And you know, as you, you've always accumulated a bigger and bigger base of pass holders and with that, you know, data and you've always been a very strong data driven company. Is there anything within the database or any interesting findings or insights as that database gets bigger and bigger that, you know, shows some change and not necessarily, you know, either positive or negative, just interesting. As that base of customers gets bigger, bigger, bigger. We have over 25 million marketable guests in our database, which is a pretty incredible asset and advantage for our company to have. I think the bigger the database gets, the more we understand the behavior and the dynamics and the experience of our guests, which, you know, over time, as we have in the past and as we look forward, the goal is to unlock that potential and differential ways to drive growth. Our real key critical focus, which we've talked about before, is going to be around ancillary, obviously. Right? The fact that we have so many committed guests, the fact that we have so many guests in our database, understanding their ancillary behavior and how we drive the loyalty, but also the capture of the story in terms of insights about their guests and their behavior. Not sharing anything proprietary or significant on this call today, but it is a tremendous competitive advantage that we have to have that much data. And you will hear us talk more about how we'll leverage that in different ways going forward. I appreciate that. Congrats on the quarter. Thanks. Thanks, David. We'll go next now to Laurent Basilescu at BMP Paribus. Oh, good morning. Good afternoon. Thanks very much for taking my question, Kirsten. I think it was mentioned in the prepared remarks that the Epic day pass units grew. Can you maybe unpack that a bit? How much did it grow? What drove the growth? And then was there any trade down due to the macro environment? Thanks, Laurent. We epic Day Pass. I'll talk about trade down first. As I shared within our renewing pass holders, we saw the majority of those pass holders renew into the same pass as last year, which is what we expected. We always have trade up, trade down. But there was nothing that was unusual or different than what our expectations were in the net migration between those two was relatively consistent with the last couple of years that we've seen on pass. And nothing unusual there, which I think is actually quite encouraging. Epic Day Pass is like our entry level opportunity to bring in new passholders. So we see growth there because we're attracting new guests into that pass. And then what we expect to do over time is encourage those guests to move up either in resort access or the number of days. So I'm always pleased to see that product growing. And what you see in the differential in the units, in our unit performance and our dollar sales performance reflects that. We saw really strong price flow through this year for the full selling cycle, which I'm also pleased to see. Okay, very helpful. And then on the $100 million transformation plan, 27 million of it for this year. Curious to know two things. Where should we start seeing that through the OPEX lines as you achieve these milestones and in terms of upcoming milestones, any timeframe that we should consider, I know this year is a smaller number versus next year, but should we assume that next milestone is after the ski season? Is that a fair assumption into spring next year? Hi Laurent. Yes, the transformation plan. Overall, the total 27 million for this year before the one time expenses is expected to grow to 67 million for next year. The places that you'll see that show up in the P and L really come through on labor primarily both through the general and administrative expenses and then also at labor that you'll see on the mountain and lodging side. And in terms of milestones, we'll continue to provide updates as we get through kind of the fiscal year and then into the coming year. We'll continue to keep you updated on the progress. Very helpful. Thank you very much and best of luck with the start of the season. Thanks, Laurent. Thank you. We go next now to Chris Waranka at Deutsche Bank. Hi, good afternoon, Kirsten and Angela. So I'm curious, you know, Kirsten, you've mentioned a few times now that you're, you know, you're going to have a number of new skiers in the, in the network this year, as you always do. As you look back to prior years, is there any consistency in how they perform on ancillary? Whether it's ski school, dining or hotel. Is there any discernible patterns? Just trying to figure out if we can expect the same level of incremental contribution from the new passovers you get. Thanks. Thanks, Chris. Well, what you saw last year at the end of, even after a tough season, last season with challenging weather and the normalization, we had really strong spend per guest result, which is really encouraging because we're attracting the guest that wants to spend and experience those ancillary businesses. As we look at, there are some differences between how and when destination guests spend versus local guests spend. But the real key for us is our capture and our ability to innovate. And what you see us doing with my Epic Gear is really trying to innovate a business that has not innovated in decades, which is how people get their gear. And it's early days for my Epic Gear because it's year one for us and launching that. But that innovation is really critical that we can unlock differential growth in ancillary through innovation as well as the investments we're making. So that's what I would hope that you should be able to see when we attract new guests into Epic Day Pass, you know, those tend to orient more toward destination guests, not locals. And so that is a guest that has a strong spend in ancillary historically. Okay, thanks, Kirsten. And as a follow up, if I could, to the extent that you may end up having a even better than expected season if the weather cooperates. How confident are you on the staffing side that you can that you a have enough and B that the costs wouldn't dramatically exceed what you expect? Currently, I am very confident in our staffing plan. Right now we are on track to achieve that staffing plan and we also have really been successful, Chris, in increasing our return rate among our frontline teams from season to season to season, achieving historic highs and return rate. And the reason why that is so important, important is because they are the ones that deliver the guest experience. And so it makes our execution of the guest experience so much stronger. And it also obviously drives efficiency in training and onboarding because we have a high, high percentage of returning staff. So I'm feeling very confident and do not have concerns on the staffing side. Okay, great. Thanks, Kirsten. Thanks Chris. We'll go next now to Ben Chaikin at Mizuho. Hey, two somewhat high level questions, I guess. First, you know, the essence of the epic pass historically, obviously is an irrefutable price value. However, with lodging ADRs up 40 to 60% versus 19 in some cases, that changes the calculus for your destination visitor, I guess. How much time do you spend, Kirsten, thinking about the degree to which lodging is or isn't a limiting factor? And then related Is there any part of you that wants more lodging exposure in order to control the entire experience and price value? I guess. Why or why not? Then I have one follow up. Thanks. Thanks Ben. You know, we are really fortunate that we have some incredible lodging partners in our resort destination. And so while I'm proud of our owned and operated lodging portfolio, we are also really pleased to have some big names in lodging that drive guests to our resort destinations and create a really appealing experience for guests to have those options in different tiers of lodging. So I'm very pleased with where we are in terms of the portfolio of what we own versus the rest of our lodging partners. And then your first part of your question, can you reiterate that again, Ben? No, I think you captured it all. This works, I guess. Just moving on to the second one. Skiing clearly was one of the leisure sectors that received a benefit from the pandemic for a variety of reasons. As you reflect on the pandemic in retrospect, do you think this limited your ability for M and A over the last two or three years, given what was likely what I would suspect was a disconnect in elevated earnings and multiples? And then do you feel any better about it today given what you've described as a Covid normalization. Thanks. You know, so many of the assets in this industry are, you know, they don't trade very frequently. They're very unique and special. There's really not new supply that comes on, which is a really great benefit that we have in this industry. You know, we have been successful during this post pandemic period in advancing our strategy to grow in a huge market in Europe by acquiring a stake in the Andermat Cedroon as well as acquiring Crown Montana. So I'm really pleased with the progress that we've made there. Hard to say if you know things are going to change or there's going to be more families or owners of assets that want to make transition. So it is a more challenging acquisition market to forecast in the ski industry. But we have been very transparent that we're focused on three things. One is we are still focused on North America, that we do believe there are some very specific areas in our portfolio that would be accretive that we would like to acquire. Second is Europe is huge. The size of the market, the participation in the sport, dramatically bigger than North America. And we believe our business model, it's a long term strategy, but our business model has some real advantages that can be successful there over time. And then we believe Asia is a big opportunity as well. And I do think we've made good progress but can't really predict in this normalization phase if that's going to unlock more or not. Thanks Ben. And we'll go next now to Matthew Boss with J.P. morgan. Hey, this is John on for Matt. Just going back to the start of the ski season. When you look at November, kind of. Early December trends, how is visitation kind of versus ancillary spend and then multi year. How are you thinking about this normalization? Headwind on the participation rate relative to new pass growth. Yeah, the normalization we talked about. John, thanks for the question. The normalization we talked about last year that we saw that there was really some variability and some surges in demand post pandemic that we saw starting to normalize. Last year the whole industry in North America was down over 9% in skier visits. Our visits in North America were down about 8%. What we're seeing is coming into that season where the normalization occurred, pass sales were up. What we're seeing is the lag effect of that normalization on the pass sales results that we have coming into this season, which is only down 2% on units. So that's kind of the impact that we're seeing from normalization. Great, thank You. We'll go next now to Arpine Kocherian at ubs. Hi, thank you so much for taking my question. And good evening. You know, your past penetration is already. At that 75% of visitation and I think you've previously talked about how you. Plan to take that higher to perhaps higher than 65% of revenue mix. Could you perhaps talk a little bit. About the puts and takes of that in terms of in the year, for the year impact? Because you know, posh pricing is of course about 35, 37% lower than Lyft. And historically strong Lyft price increases have obviously helped you close that gap nicely in terms of impact on overall P and L. I guess I'm indirectly asking. About sort of whether there's more room. To push lift pricing higher here from whatever trends you have in front of you, from whatever you your whatever early read you might have into lift pricing. Thank you. And I have a quick follow up. Okay. If I'm interpreting your question correctly, I There's a couple of areas that we still see for growth and we are still very focused on that vision that you just articulated in terms of what we're trying to achieve is the percentage of our lift revenue that's committed in advance. And there's a couple of areas that we think are still opportunities. Obviously we still have lift ticket guests that our goal is to convert them into a pass. We also see in under penetrated markets and destination markets that there's still we are not maxed out or at a maturity level of where we can be with pass for the number of skiers in those markets and the opportunity to convert those. And then there's the database which we have, you know, over we have over 2.3 million passholders, but we have over 25 million marketable guests in our database. And so the key for us is how do we connect with them in a relevant way and bring them in to our network of resorts. So those are all opportunities for growth. When I think about lift tickets versus Pass, you know, we are not focused on lift ticket pricing being lower to drive volume. Right. That is a short term, not short term and refundable decision. So we do price our lift tickets to reflect the experience we're delivering, but also to encourage people to make a commitment in advance and that there's a value to the exchange that people are making to buy a pass, which is we're asking you to make a non refundable commitment to us and for the whole season and our network of resorts. And in exchange we're giving you that incredible value. Every year we look at the price elasticity data and the behavioral data that we have to decide what are the resort lift ticket prices going to be and what are the pass prices going to be right now where we landed coming into this season with our past results and where we are on lift ticket pricing. I'm very pleased with the balance that we have between those two. And I think one last thing I'll just mention to remind people, because people often think about lift ticket prices and they think about Vail Mountain is we have a really large portfolio, 42 owned and operated resorts that cover a very wide spectrum of different types of skiers and different price points as well. But we look at it constantly and adjust when we see data or behavior that we think we need to make adjustments to our approach. Thank you very much. And then one quick one. You know, I know you haven't given guidance on this outside of Capex, but whatever you could share directionally would be helpful. I was wondering if you could detail what kind of opex you are including in your guidance for 2025. For my EPIC year, anything directionally would be helpful. Hi Arpi Na. Yeah, we do not disclose what we're including in there for OPEX related to this. As we talked about it is early. This is our first year of rollout. We have a lot of the infrastructure already in place. So if you think about what we're doing to drive this incremental business. Right. You can think about that in terms of the capital that we announced. But then on the operating expenses there'll be some incremental variable costs that will come with delivering that experience. But we haven't provided specific guidance. Got it. Thank you very much. I'll just build on that to reinforce the point that this is a brand new business model that doesn't exist really in the ski industry right now. So obviously there is an awareness and a trial and conversion plan associated like there would be with any business. But we are also quite fortunate, as Angela said, that we're already heavily in the gear business in rental and retail and have substantial infrastructure. So really connecting the existing infrastructure we have and utilizing it in a different way to deliver a completely different business model we're focused on. Thank you very much. Thank you. Thank you. We'll go next now to Paul Golding at Macquarie Capital. Thanks so much. Just a quick question to start with on Australia. Just wanted to separate the commentary around the performance over this past season. It seemed like there was a comment in the press release about lower demand and Just wanted to understand where that's coming from. Is that just comping the normalization they were a season behind post Covid, or is that relating to some other structural dynamic there? Thanks, Paul. This past season, winter season in Australia, we had historic challenging weather conditions and snow conditions. So that really impacted the demand at the Australian ski resorts. Got it. So aside from demand, and I'm sorry, aside from weather and inflation, nothing specific to that lower demand comment that would be separate or structural to that market? No, that's what we were referring to. We were talking about going into the season. We knew that passes were impacted obviously on the demand side. And then the conditions on top of that were the, you know, economies compounding factor for the winter in Australia. Got it. Thanks, Angela. And then another question around this delayed decision making due to prior year weather. Just wondering if there are any other levers left to overcome some of this delayed decision making, aside from the natural escalators that you have in past price and better weather conditions in the preceding year, obviously, which wouldn't have you in the delayed decision making situation with some of the resorts. So just wondering, any other levers you have that you're considering whether it's bundling or something on the lodging front or otherwise to help give more visibility earlier in the selling season to what season dynamics might look like. Thank you. Thanks, Paul. Yeah, we are ideally, we would love to have, you know, all of our passholders committed in the spring. And we've been quite successful over time in moving a behavior that used to occur one or two weeks before someone decided to show up on their ski vacation and moving that earlier and earlier in the selling cycle. This year, as you noted, we did see some delayed decision making coming off of a tough season. So as we head into next year's pass sales, we always do a situation assessment on the business. What worked, what didn't work, what are the things that we want to change? And that is a dynamic, Paul, that we always look at, which is, well, what are the different incentives for our guests to commit as early as possible? Does anything need to change? Obviously those passes for next the following season are not going on sale yet. So I'm not going to divulge any of the things that we're thinking about, but we do look at it every year and we're constantly striving to pull that decision making and make it worthwhile for our guests to want to commit to us as early as possible. More to come on that. Great, thanks. Thank you. And we'll take our final question today from Brandt Montour of Barclays. Hey, good afternoon, everybody. Thanks for squeezing me in here. So first question is on Whistler. Kirsten, I want to make sure I'm just not reading too deep into your comments about destination guests being important here. But I guess the question is I know Whistler has probably a very large relative mix of international guests and guests traveling from afar. And so is there any sort of dynamic whereby if you don't, there's a lag related to those folks having to book farther out and if you get too far into the season without seeing a recovery in those bookings and you might not be able to make that up even in a really good weather season, or is that not really the dynamic there? I can't say I'm anticipating anything like that right now. The fact that Whistler Blackcomb is off to such a great start with the amount of terrain that's open, the snow conditions, you know, last season was a tough season at Whistler Blackcomb. So getting out of the gates really strong early here, you know, the hope is that, that then our international guests and our domestic destination guests are thinking about and planning their ski vacations at this time for the season and that it has a positive impact on it. So at this point, I can't say that, you know, I'm anticipating, we're so early in the season right now, I'm not anticipating that there's, you know, some threshold that we're going to go past this early where it becomes difficult for people to book their vacations. What I am seeing with the Whistler lodging data is with each reporting cycle that comes out on that, those lodging bookings, it seems to be improving and moving in the direction that we would want it. So, yeah, just wanting to be transparent about what we're seeing in those early indicators. And we are fortunate that that early snow is a real positive and hopefully influences people to want to book their vacations there. Okay, great, that's helpful. And then just following up with a high level question about the east coast specifically, you know, looking back at the last couple years, obviously really tough weather, but you know, looking through the lens of, you know, weather potentially shifting warmer, even permanently warmer, even if it's marginally. I'm curious if in your long term planning you've thought about adjusting your operating model at any of those mountains to account for that in order to maximize cash flow as well as the strategic importance of those mountains? Yeah, Brant, we're always looking at our operations and our operating model across all of the resorts and particular in the east making sure, because that geography is relatively new for our company or newer for our company. So our Mountain Ops teams are constantly learning and looking at what adjustments they need to make given the variability that occurs in the East. And then obviously we're focused on geographic diversity. We think being in the east is really important because it has access to some major metropolitan markets where there's a lot of skiers. And that has a big impact on our pass sales, to have that access and that connection in our network. But the geographic diversity of our company, to have a strong presence in the Rockies, a strong presence in the west with Whistler Blackcomb in Canada as well as the east, to balance out where we have challenges is hopefully the goal, even when there's some weather variability. Great. Thanks everyone. Thanks Brandt. That is all the time we have for questions today. Ms. Lynch, back to you for any closing comments. Thank you, Operator. This concludes our fiscal 2025 first quarter earnings call. Thanks to everyone who joined us today. Please feel free to contact Angela or me directly should you have any further questions. Thank you for your time this afternoon and Goodbye. Thank you, Ms. Lynch. Again, that does conclude today's Vail Resorts fiscal first quarter 2025 earnings conference call and webcast. You may disconnect your line at this time and have a wonderful day. Goodbye everyone.",
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          "text": "Thank you, Sean.",
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          "text": "Thanks Kirsten and good afternoon everyone. As Kirsten mentioned, this quarter's results were driven by growth in our North American summer business offset by lower results from our Australian resorts cost inflation, the inclusion of Kron Montana, the one time cost related to the two year Resource Transformation Plan and acquisition and related integration related expenses. Net loss attributable to Vail Resorts was $172.8 million for the first quarter of fiscal 2025 compared to a net loss attributable to vail resorts of $175.5 million in the same period. In the prior year resort reported EBITDA loss with $139.7 million for the first quarter of fiscal 2025 which included $2.7 million of one time cost related to the previously announced two year resource transformation plan and $0.9 million of acquisition related in integration related expenses compared to a resort reported EBITDA loss of $139.8 million for the first quarter of fiscal 2024 which included 1.8 million of acquisition and integration related expenses as of October 31, 2024. The Company's total liquidity as measured by total cash plus revolver availability was approximately $1 billion. This includes $404 million of cash on hand, $620 million of total combined revolver availability and as of October 31, 2024, the Company's net debt was 2.8 times its trailing twelve months total reported EBITDA Regarding the return of capital to shareholders, the Company declared a quarterly cash dividend of $2.22 per share of Vail Resorts common stock payable on January 9, 2025 to shareholders of record as of December 26, 2024. In addition, the Company repurchased approximately 115,000 shares during the quarter at an average price of approximately $174 for a total of $20 million. The company has 1.6 million shares remaining under its authorization for share repurchases. We will continue to be disciplined stewards of our shareholders capital, prioritizing investments in our guest and employee experience, high return capital projects, strategic acquisition opportunities and returning capital to our shareholders. The Company has a strong balance sheet and remains focused on returning capital to shareholders while always prioritizing the long term value of our shares. Now turning to our outlook for 2025, the company's resort Reported EBITDA guidance for the year and ending July 31, 2025 is unchanged from the prior guidance provided on September 26, 2024. The Company is updating its guidance for net income attributable to Vail Resorts, which it now expects to be between $240 million and $316 million, up from the prior guidance range of $224 million to $300 million. The primary difference is due to a $17 million increase from the gain on sale of real property related to the resolution of the October 2023 Eagle County District Court final Ruling evaluation regarding the Town of Vail's condemnation of the Company's East Vail property that was planned for Vail Resort's incremental Affordable Workforce Housing Project, a transaction that has been recorded as real Estate Reported ebitda. Additionally, the guidance is updated to include a decrease in expected interest expense of approximately $2 million, which assumes that interest rates remain at current levels for the remainder of fiscal 2025. These changes have no impact on expected resort reported EBITDA. The company continues to expect Resort Reported EBITDA for fiscal 2025 to be between $838 million and $894 million, including approximately $27 million of cost efficiencies and an estimated $15 million in one time cost related to the multi year Resource Efficiency Transformation Plan and an estimated $1 million of acquisition and integration related expenses specific to Crown Montana as compared to fiscal 2024 the fiscal 2025 guidance includes the assumed benefit from a return to normal weather conditions after the challenging conditions in fiscal 2024, more than offset by a return to normal operating costs and the impact of continued industry normalization impacting demand. Additionally, the guidance reflects the negative impact from the record low snowfall and related shortened season in Australia in the first fiscal quarter of 2025 which negatively impacted demand and resulted in a $9 million decline of resort reported EBITDA compared to the prior year period. After considering these items, we expect resort reported EBITDA to grow from price increases in ancillary spending, the Resource Efficiency Transformation Plan and the addition of Cron Montana for the full year. The guidance also assumes a continuation of the current economic environment, normal weather conditions for the 2024, 2025 North American and European ski season and the 2025 Australian ski season and the foreign currency exchange rates as of Our original fiscal 2025 guidance issued September 26, 2024, Foreign Currency Exchange rates have experienced recent volatility relative to the current guidance. If the currency exchange rates as of yesterday December 8, 2024 of $0.71 between the Canadian dollar and US dollar, $0.64 between the Australian dollar and US dollar and $1.14 between the Swiss franc and the US dollar were to remain at those levels for the remainder of the fiscal year, the Company expects this would have an impact on fiscal 2025 guidance of approximately negative $5 million for resort reported EBITDA. Now I'll turn the call back over to Kirsten.",
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          "text": "Thank you, Angela. Vail Resorts is committed to enhancing the guest experience and supporting the Company's growth strategies through significant capital investments. For calendar year 2025, the company plans to invest approximately $198 million to $203 million in core capital before $45 million of growth capital investments at its European resorts including $41 million at Andermatt Cedron and $4 million at Crown, Montana and $6 million of real estate related capital projects to complete multi year transformational investments at key base areas at Breckenridge Peak 8 and Keystone River Run and planning investments to support the development of the West Lion's Head area into a forest based village at Vail Mountain. Including European growth capital investments and real estate related capital, the Company plans to invest approximately $249 million to $254 million in calendar year 2025. Projects in the calendar year 2025 capital plan described remain subject to approvals. In calendar year 2025, the company will embark on two multi year transformational investment plans at Park City Mountain and Vail Mountain. At Park City Mountain, the transformation of Park City Mountain's Canyons Village is underway to support a world class luxury based village experience. These investments will support Park City Mountain in welcoming athletes and fans from across the world who visit the resort as it serves as a venue for the 2034 Olympic Winter Games. As announced in September, we are replacing the Sunrise Lift with a new 10 person gondola in partnership with the Canyon Village Management association in calendar year 2025 which will provide improved access and and enhanced guest experience for existing and future developments within Canyons Village. The Company also plans to enhance the beginner and children's experience by expanding the existing Red Pine Lodge restaurant to upgrade the dining experience for ski and ride school guests and by improving the teaching terrain surrounding the Red Pine Lodge. These investments are further supported by the construction of the Canyons Village Parking garage, a new covered parking structure with over 1,800 stalls being developed by TCFC, the master developer of Canyons Village, which is expected to break ground in spring 2025, planning of additional investments at Park City Mountain across the mountain experience is underway and additional projects will be announced in the future. At Vail Mountain, the Company previously announced the development of the West Lion's Head area into a fourth base village at Vail Mountain in partnership with Vail and East West Partners. The new base village will reinforce Vail Mountain status as a world class destination and is anticipated to feature access to the resort's 5,317 acres of legendary terrain plus new lodging, restaurants, boutiques and skier services as well as community benefits such as workforce housing, public spaces, transit and parking. In addition, the Company is developing a multi year plan to invest in base area improvements, lift upgrades and across the beginner ski and ride, school and dining experiences. In calendar year 2025, the company is planning to renovate guest rooms and common spaces at its luxury Vail hotel, the Arabelle at Vail Square. Additionally, in calendar year 2025, the company plans to invest in real estate planning to develop the West Lion's Head area. In addition to embarking on two multi year transformational investment plans, the Company is planning significant investments across the guest experience. In calendar year 2025. At Andermatt Cedroon, the company plans to replace the four person fixed grip palm lift and the four person fixed grip QAM lift with two new six person high speed lifts that will increase capacity and significantly improve the guest experience at the Valval area. The Company also plans to upgrade and expand snowmaking infrastructure at the Gemstock area on the western side of the resort to enhance the consistency of the guest experience, particularly in the early season and significantly improve energy efficiency. In addition, the Company plans to complete the previously announced upgrade of the Cedroon Milates snowmaking infrastructure and improvements to the Milates and Nochen restaurants. Through calendar year 2025. Vail Resorts will have invested approximately 50 million of the total 110 million Swiss francs capital that was invested as part of the purchase of the Company's majority ownership stake in Andermatt Cedrin. At Perisher in Australia, the Company plans to replace the Mount Perisher double and triple chairs with a new six person high speed lift following the capital spending in calendar year 2024 that is continuing into calendar year 2025 to be completed in time for the 2025 winter season in Australia. In addition, the Company is continuing to invest in innovative technology to enhance the guest experience. In the coming year the Company will be investing in additional new functionality for the My Epic app, including new tools to better communicate with and personalize the experience for our guests. The Company will also be building on the pilot of My Epic Assistant, a new guest service technology within the My Epic app powered by advanced AI resort experts at four resorts for the upcoming 20242025 ski season. The Company is planning to invest in more advanced AI capabilities in calendar year 2025 to support the dining experience. The Company plans to invest in physical improvements to dining outlets at its largest destination resorts to improve throughput. The company is also continuing to invest in waste reduction and emissions reduction projects across its resorts to achieve its goal of zero net operating footprint by 2030. At Breckenridge, the Company is making real estate related investments to complete the multi year transformation of the Breckenridge Peak Gate base area where the company has enhanced the beginner and children's experience and increased uphill capacity with the introduction of a new four person high speed five chair, new teaching terrain and a transport carpet from the base making the beginner experience more accessible. At Keystone, the Company is investing in acquisition and build out costs for skier services that will reside in the newly developed Kindred Resort at Keystone, a family friendly luxury Ski in, Ski out Lodging Residence and Rock Resorts branded hotel at the base of the River Run Gondola including new restaurants a full service space, spa, pool and hot tub facilities and the new home for the Keystone Ski and Ride School and a retail and rental shop. The Kindred development follows the transformational lift serve terrain expansion project in Bergman bowl, increasing lift served terrain by 555 acres with the addition of a new six person high speed lift which was completed for the 2023-2024 North American Ski season. In addition to the investments planned for calendar year 2025, the company is completing significant investments that will enhance the guest experience for the upcoming 2024, 2025 North American and European ski season. As previously announced, the Company expects its capital plan for calendar year 2024 to be approximately $189 million to $194 million, excluding $13 million of incremental capital investments in premium fleet and fulfillment infrastructure to support the official launch of Myopic gear for the 20242025 winter season at 12 destination and regional resorts across North America, $7 million of growth capital investments at Anderman Sidroon, $2 million of maintenance and $2 million of integration investments at Crown Montana and $3 million of of reimbursable capital. Including these one time investments, the Company's total capital plan for calendar year 2024 is now expected to be approximately $216 million to $221 million. In closing, I would like to thank all of our team members, especially our frontline teams across all of our mountain resorts for their passion, hard work and commitment to creating an experience of a lifetime for our guests. The guest experience that our employees create is our mission as a company and is core to our success. We all look forward to welcoming guests to our mountain resorts this winter season. At this time, Angela and I will be happy to answer your questions. Operator, we are ready for questions.",
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          "text": "Certainly, Ms. Lynch. Ladies and gentlemen, at this time, if you wish to ask a question, Please please press star1 on your telephone keypad. You may remove yourself from the queue by pressing Star two again. Please limit yourself to one question and one follow up. We'll go first to Sean Kelly with Bank of America. Hi, good afternoon everyone. Hi Kirsten and Angela. Maybe if we could just start. I'm kind of curious. Obviously the season is off to a very good start on the weather front. It sounds like. And built into the guidance is some behavioral normalization that you've called out a number of times. Can you just give us your sense on kind of what you're seeing so far? I know it's extremely early and early season visit patterns don't always reflect the destination guest. But just what are you seeing so far in terms of kind of behavior for the resorts that are open? Kind of how are you feeling about just that activity level thus far, given what you can see through Thanksgiving?",
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          "text": "Thanks for the question, Sean. I think a couple of indicators to look at. One is pass sales. Obviously we're very pleased with the outcome of our pass sales and the improvement in the growth rates in the final selling period to get to 2% decline in units and up 4% in sales dollars. So that's over 2.3 million guests that are committed coming to our resort. So that's a strong indicator for us. The early season conditions are very encouraging and especially being able to open some of our resorts. The other indicator is lodging that we're looking at and us lodging in the market data in the markets where our resorts are we see are consistent. The lodging booking data is consistent with prior year levels for the full season, better than pre Covid levels. And then Whistler Blackcomb, as I mentioned in the opening remarks, those bookings are lagging prior year and pre Covid levels. Our owned and operated lodging, we have more recent data on that and we are seeing that slightly above prior year. And all of those indicators seem to be improving as we're getting closer to the season. But we're really looking at all of that in totality. The strong conditions where we landed on pass sales and then the lodging indicators. So as a result, we are holding guidance at this time.",
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          "text": "Fantastic. And then maybe just as my follow up, Whistler's come up in a couple of the conversations and questions since the release, could just talk about the sort of overall exposure there if that were to stay where it's at, is that enough to be a risk to guidance? Or when you kind of put all those other pieces in, and especially if the snow conditions remain where they are, is there enough local visitation and other things that offset that? And that's not something we need to be overly worried about at this point in the season.",
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          "text": "When I look at the Whistler Blackcomb lodging data, I think what we see is that it continues to be improving. So I think given the strong conditions, I think it's possible what we're seeing in the bookings is some delayed decision making, which you obviously thought in total for our past sales is our trends improved as we went through the selling cycle. The conditions are off to a really great start. The terrain that we have is off to a great start. Destination guests are very important to that resort and the outcomes associated with that resort. So we'll continue to monitor and do everything we can to encourage visitation to the resort. So nothing to be, I would say, concerned about right in this moment. Just a mix of indicators coming off of I think a really tough year at Whistler Blackcomb last year. So the fact that there could be some delayed decision making going on where people want to wait and see how the season starts there, I think makes sense and we'll hope to see that play out as the season moves along here.",
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          "text": "Perfect. Thank you so much.",
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          "text": "Great. That's helpful. Thank you for that, Angela. I'll pass it on. Thank you. We go next now to Megan Clapp with Morgan Stanley.",
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          "text": "Thank you. We go next now to Jeff Stanchel at Stifel. Good afternoon. Keir Sant Angelo, thanks for taking our questions starting off, I was hoping maybe just to expand upon hearing your answer to Sean's first question and more specifically, narrow in a little bit on what you're seeing in terms of lodging bookings indicators specifically for the Christmas and the New Year's holiday period. And as a corollary to that, have you seen sort of the bookings trends or the bookings pace accelerate in those markets that have experienced, we'll say, some favorable early season snowfall? Have you seen the bookings pace accelerate in those markets for that holiday period?",
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          "text": "Okay, great. That's helpful. Thank you for that, Kirsten. And then for my follow up turning over to capital allocation. If I bridge down from your net income guidance to what we think you should do in free cash flow this year, by my math, your current dividend policy assuming unchanged, implies about 80 to 90% payout from discretionary free cash flow. Assuming that is accurate, can you just expand a little bit on your philosophy or your willingness to tap into your balance sheet should you see another year of challenging weather conditions and that drive the payout level potentially north of 100%. And sort of in a similar vein, how should we think about your dividend growth strategy just in light of the post Covid normalization trend that you've been talking about that maybe wasn't fully understood or appreciated looking back one or two years ago. And that's all for me.",
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          "text": "Thanks.",
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          "text": "Good afternoon. Thanks so much. Wanted to shift a little bit to past sales. Obviously encouraging to see things improve a bit, especially that positive unit growth here in the most recent period. And you did give a lot of color in the prepared remarks that sales.",
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          "text": "Hi Jess, thanks for the question. As we track the market data for our resorts in the US as well as the market data for Whistler and then we look at our owned and operated, we are consistently seeing as time moves closer here to the season that there are improvements in the bookings in total for the market data for our US Resorts we are seeing above pre Covid in occupancy or bookings and pretty consistent with prior year. I think we've seen those improvements also happening during the key holiday periods. And then our owned and operated, I would say because we have more visibility to that data more recent versus the market data that gets published to us when we look at owned and operated, I just want to remind you our owned and operated is a pretty small percentage of the lodging. So it's a directional indicator. It continues to reinforce, Jeff, what we see, which is those booking patterns seem to be strengthening as we get closer and as people are seeing the snow conditions are strong. So yes, we are definitely seeing it moving in that direction and hope to see that momentum continue.",
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          "text": "Thanks, Jeff. It's Angela. I'll take this one. And yeah, we always look at our dividend and really all of our capital allocation alternatives. We're constantly looking and reevaluating that. What you saw us do, right, for this quarter is announce our investment in the guest experience and investment in our resorts, which we've consistently done. And for return of capital, right. We've, we have been prioritizing the dividend and even in a year like last year where we did miss our original guidance. Right. We still were able to cover our dividend payout and pursue all of our capital allocation priorities. So we feel very comfortable. We reaffirmed and announced our dividend stayed at the same level. We typically look at our dividend in the March quarter and we'll continue to reevaluate it though, every quarter.",
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          "text": "Trends improved due to the expected renewal strength.",
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          "text": "So maybe can you just give a.",
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          "text": "Little bit more around that was it.",
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          "text": "That renewals were just a little bit.",
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          "text": "Better than you were expecting and you.",
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          "text": "Spoke to some positive cadence, I think when you were answering a question earlier. So how much do you think was driven by that, by the early openings at some of your resorts? And any commentary around just more around.",
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          "text": "The composition of the better than expected.",
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          "text": "Pass sales in the last period would be great.",
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          "text": "Thanks, Megan. Sure. I'm happy to give a little more context on pass sales. We're very pleased with the outcome of the results on pass sales. The results that what we saw a couple of dynamics. One is very strong loyalty. So our renewing passholders, we saw growth among our renewing passholders and that growth was across all of our geographies, we also saw the majority of those renewers actually renewing into the exact same path as we had expected, which we think is a very positive dynamic as well on the new side. I talked about this a little bit in the prepared remarks. New passholders. We acquired a substantial number of new passholders. They come from three different, primarily three different sources. And there's different dynamics in each one of those. There's lapsed guests. So people who have come to our resorts in the past, but not this past year. And we saw growth converting those guests into new passholders for this coming season. Where we saw the decline year over year was on prior year lift ticket guests, which I have talked about in prior earnings calls, which was really just driven by the size of that audience being smaller after very tough weather season and industry normalization. And then prospect guests, which is basically people who are new to our database who we've not seen in our database before. That the number of those passholders also was down versus prior year. We did see strong price realization, which I'm really pleased to see. And then this last dynamic that I'll highlight is delayed decision making. I think if you look through the cadence of our selling cycle this year, we definitely saw renewers as well as new guests delaying decision making later into the selling cycle cycle which impacted and we talked about on some of the prior earnings calls did impact the cadence of when the results came in and why between September and December we saw the improvement in the growth rates during that late part in the selling cycle.",
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          "text": "Okay, great.",
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          "text": "Thanks, Kristen, that's helpful.",
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          "start_time": "00:35:17,130",
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          "text": "Just as my follow up, can you talk a little bit about the my epic year rollout and how the uptake.",
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          "text": "Of that was relative to your expectations.",
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          "text": "I understand it's not a full rollout yet, but would just be curious to kind of hear any early commentary on.",
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          "text": "Uptake and how that makes you think.",
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          "text": "About your expectations for ancillary in the upcoming season.",
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          "text": "Yes, thanks for the question. We continue to be very excited about my epic year. I would say it's very early. I mean it's not a, you know, a pass type of business where all of it is committed in advance. So it's very early in the selling cycle. We are launching year one at 12 different resorts with some limitations so that we can make sure we scale the business appropriately. So nothing really substantial to report in terms of results because it's so early in the selling cycle for that experience. I think in March we will have a more robust update to shares. We'll have a Much better idea of the experience our guests had, the number of members that subscribe to the service. I think we'll have more details share with you in March. It's just a little too early right now.",
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          "text": "Okay, understood. Thank you.",
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          "text": "Thanks, Megan.",
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          "text": "Got it. So aside from demand, and I'm sorry, aside from weather and inflation, nothing specific to that lower demand comment that would be separate or structural to that market?",
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          "text": "Thank you. We go next now to David Katz with Jefferies. Hi everyone. Thanks for taking my questions. Appreciate it. Can we just go double back to the guidance one more time, apologize if we're beating this a little bit. But with, with the stronger start to the year and you know, perhaps, you know, maybe some of the Australian season there, can we just sort of walk through the puts and takes and how you're thinking about the rest of the year? Are, you know, are you expecting weather to normalize at the results that at the resorts that have started off strongly, are you expecting others to improve? What are the pluses and minuses as we kind of unpack the guidance?",
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          "text": "Thanks, David. I think a couple of things for us to think about. First is both our Q1 results and our past sales results were generally in line with our expectations. We, number one, number two, we have strong early season conditions as we talked about in the Rockies, the West, So I think we're in a really good position heading into the season. And then third is we're looking at lodging bookings and the trend on lodging bookings and where we stand on lodging bookings in our US Resort markets as well as Whistler Blackcomb, our largest resort, the lodging bookings there. So it just point it's pretty early in this season. We're looking at all of those factors. The season's just begun and you know, hoping for a strong season but not changing our guidance based on the mix of indicators that we have right at this point, we still have a significant part of our season ahead of us.",
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          "text": "I understood. And you know, as you, you've always accumulated a bigger and bigger base of pass holders and with that, you know, data and you've always been a very strong data driven company. Is there anything within the database or any interesting findings or insights as that database gets bigger and bigger that, you know, shows some change and not necessarily, you know, either positive or negative, just interesting. As that base of customers gets bigger, bigger, bigger.",
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          "text": "We have over 25 million marketable guests in our database, which is a pretty incredible asset and advantage for our company to have. I think the bigger the database gets, the more we understand the behavior and the dynamics and the experience of our guests, which, you know, over time, as we have in the past and as we look forward, the goal is to unlock that potential and differential ways to drive growth. Our real key critical focus, which we've talked about before, is going to be around ancillary, obviously. Right? The fact that we have so many committed guests, the fact that we have so many guests in our database, understanding their ancillary behavior and how we drive the loyalty, but also the capture of the story in terms of insights about their guests and their behavior. Not sharing anything proprietary or significant on this call today, but it is a tremendous competitive advantage that we have to have that much data. And you will hear us talk more about how we'll leverage that in different ways going forward.",
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          "text": "I appreciate that. Congrats on the quarter.",
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          "text": "Thanks.",
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          "text": "Thanks, David.",
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          "text": "We'll go next now to Laurent Basilescu at BMP Paribus. Oh, good morning.",
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          "start_time": "00:40:36,488",
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          "text": "Good afternoon.",
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          "text": "Thanks very much for taking my question, Kirsten. I think it was mentioned in the prepared remarks that the Epic day pass units grew. Can you maybe unpack that a bit? How much did it grow? What drove the growth? And then was there any trade down due to the macro environment?",
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          "text": "Thanks, Laurent. We epic Day Pass. I'll talk about trade down first. As I shared within our renewing pass holders, we saw the majority of those pass holders renew into the same pass as last year, which is what we expected. We always have trade up, trade down. But there was nothing that was unusual or different than what our expectations were in the net migration between those two was relatively consistent with the last couple of years that we've seen on pass. And nothing unusual there, which I think is actually quite encouraging. Epic Day Pass is like our entry level opportunity to bring in new passholders. So we see growth there because we're attracting new guests into that pass. And then what we expect to do over time is encourage those guests to move up either in resort access or the number of days. So I'm always pleased to see that product growing. And what you see in the differential in the units, in our unit performance and our dollar sales performance reflects that. We saw really strong price flow through this year for the full selling cycle, which I'm also pleased to see.",
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          "start_time": "00:42:11,440",
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          "text": "Okay, very helpful. And then on the $100 million transformation plan, 27 million of it for this year. Curious to know two things. Where should we start seeing that through the OPEX lines as you achieve these milestones and in terms of upcoming milestones, any timeframe that we should consider, I know this year is a smaller number versus next year, but should we assume that next milestone is after the ski season? Is that a fair assumption into spring next year?",
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          "text": "Hi Laurent. Yes, the transformation plan. Overall, the total 27 million for this year before the one time expenses is expected to grow to 67 million for next year. The places that you'll see that show up in the P and L really come through on labor primarily both through the general and administrative expenses and then also at labor that you'll see on the mountain and lodging side. And in terms of milestones, we'll continue to provide updates as we get through kind of the fiscal year and then into the coming year. We'll continue to keep you updated on the progress.",
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          "start_time": "00:43:25,250",
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          "text": "Very helpful. Thank you very much and best of luck with the start of the season.",
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          "text": "Thanks, Laurent.",
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          "start_time": "00:58:13,170",
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          "text": "No, that's what we were referring to. We were talking about going into the season. We knew that passes were impacted obviously on the demand side. And then the conditions on top of that were the, you know, economies compounding factor for the winter in Australia.",
          "created_at": "2025-01-08T18:59:06.310468Z",
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          "text": "Thank you. We go next now to Chris Waranka at Deutsche Bank. Hi, good afternoon, Kirsten and Angela. So I'm curious, you know, Kirsten, you've mentioned a few times now that you're, you know, you're going to have a number of new skiers in the, in the network this year, as you always do. As you look back to prior years, is there any consistency in how they perform on ancillary? Whether it's ski school, dining or hotel. Is there any discernible patterns? Just trying to figure out if we can expect the same level of incremental contribution from the new passovers you get. Thanks.",
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          "text": "Thanks, Chris. Well, what you saw last year at the end of, even after a tough season, last season with challenging weather and the normalization, we had really strong spend per guest result, which is really encouraging because we're attracting the guest that wants to spend and experience those ancillary businesses. As we look at, there are some differences between how and when destination guests spend versus local guests spend. But the real key for us is our capture and our ability to innovate. And what you see us doing with my Epic Gear is really trying to innovate a business that has not innovated in decades, which is how people get their gear. And it's early days for my Epic Gear because it's year one for us and launching that. But that innovation is really critical that we can unlock differential growth in ancillary through innovation as well as the investments we're making. So that's what I would hope that you should be able to see when we attract new guests into Epic Day Pass, you know, those tend to orient more toward destination guests, not locals. And so that is a guest that has a strong spend in ancillary historically.",
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          "text": "Okay, thanks, Kirsten. And as a follow up, if I could, to the extent that you may end up having a even better than expected season if the weather cooperates. How confident are you on the staffing side that you can that you a have enough and B that the costs wouldn't dramatically exceed what you expect?",
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          "start_time": "00:45:57,412",
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          "text": "Currently, I am very confident in our staffing plan. Right now we are on track to achieve that staffing plan and we also have really been successful, Chris, in increasing our return rate among our frontline teams from season to season to season, achieving historic highs and return rate. And the reason why that is so important, important is because they are the ones that deliver the guest experience. And so it makes our execution of the guest experience so much stronger. And it also obviously drives efficiency in training and onboarding because we have a high, high percentage of returning staff. So I'm feeling very confident and do not have concerns on the staffing side.",
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          "text": "Okay, great. Thanks, Kirsten.",
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          "text": "Thanks Chris.",
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          "start_time": "00:46:56,880",
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          "text": "We'll go next now to Ben Chaikin at Mizuho. Hey, two somewhat high level questions, I guess. First, you know, the essence of the epic pass historically, obviously is an irrefutable price value. However, with lodging ADRs up 40 to 60% versus 19 in some cases, that changes the calculus for your destination visitor, I guess. How much time do you spend, Kirsten, thinking about the degree to which lodging is or isn't a limiting factor? And then related Is there any part of you that wants more lodging exposure in order to control the entire experience and price value? I guess. Why or why not? Then I have one follow up. Thanks.",
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          "start_time": "00:47:37,050",
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          "text": "Thanks Ben. You know, we are really fortunate that we have some incredible lodging partners in our resort destination. And so while I'm proud of our owned and operated lodging portfolio, we are also really pleased to have some big names in lodging that drive guests to our resort destinations and create a really appealing experience for guests to have those options in different tiers of lodging. So I'm very pleased with where we are in terms of the portfolio of what we own versus the rest of our lodging partners. And then your first part of your question, can you reiterate that again, Ben?",
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          "start_time": "00:48:19,780",
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          "text": "No, I think you captured it all. This works, I guess. Just moving on to the second one. Skiing clearly was one of the leisure sectors that received a benefit from the pandemic for a variety of reasons. As you reflect on the pandemic in retrospect, do you think this limited your ability for M and A over the last two or three years, given what was likely what I would suspect was a disconnect in elevated earnings and multiples? And then do you feel any better about it today given what you've described as a Covid normalization. Thanks.",
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          "start_time": "00:48:50,650",
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          "text": "You know, so many of the assets in this industry are, you know, they don't trade very frequently. They're very unique and special. There's really not new supply that comes on, which is a really great benefit that we have in this industry. You know, we have been successful during this post pandemic period in advancing our strategy to grow in a huge market in Europe by acquiring a stake in the Andermat Cedroon as well as acquiring Crown Montana. So I'm really pleased with the progress that we've made there. Hard to say if you know things are going to change or there's going to be more families or owners of assets that want to make transition. So it is a more challenging acquisition market to forecast in the ski industry. But we have been very transparent that we're focused on three things. One is we are still focused on North America, that we do believe there are some very specific areas in our portfolio that would be accretive that we would like to acquire. Second is Europe is huge. The size of the market, the participation in the sport, dramatically bigger than North America. And we believe our business model, it's a long term strategy, but our business model has some real advantages that can be successful there over time. And then we believe Asia is a big opportunity as well. And I do think we've made good progress but can't really predict in this normalization phase if that's going to unlock more or not. Thanks Ben.",
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          "start_time": "00:50:35,370",
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          "text": "And we'll go next now to Matthew Boss with J.P. morgan. Hey, this is John on for Matt. Just going back to the start of the ski season. When you look at November, kind of.",
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          "text": "Early December trends, how is visitation kind of versus ancillary spend and then multi year.",
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          "start_time": "00:50:52,074",
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          "text": "How are you thinking about this normalization? Headwind on the participation rate relative to new pass growth.",
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          "start_time": "00:51:00,690",
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          "text": "Yeah, the normalization we talked about. John, thanks for the question. The normalization we talked about last year that we saw that there was really some variability and some surges in demand post pandemic that we saw starting to normalize. Last year the whole industry in North America was down over 9% in skier visits. Our visits in North America were down about 8%. What we're seeing is coming into that season where the normalization occurred, pass sales were up. What we're seeing is the lag effect of that normalization on the pass sales results that we have coming into this season, which is only down 2% on units. So that's kind of the impact that we're seeing from normalization.",
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          "start_time": "00:51:53,110",
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          "text": "Great, thank You. We'll go next now to Arpine Kocherian at ubs.",
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          "start_time": "00:52:04,470",
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          "text": "Hi, thank you so much for taking my question.",
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          "start_time": "00:52:07,238",
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          "text": "And good evening. You know, your past penetration is already.",
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          "start_time": "00:52:10,854",
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          "text": "At that 75% of visitation and I think you've previously talked about how you.",
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          "start_time": "00:52:15,030",
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          "text": "Plan to take that higher to perhaps higher than 65% of revenue mix.",
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          "start_time": "00:52:19,670",
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          "text": "Could you perhaps talk a little bit.",
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          "start_time": "00:52:21,196",
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          "text": "About the puts and takes of that in terms of in the year, for the year impact? Because you know, posh pricing is of course about 35, 37% lower than Lyft. And historically strong Lyft price increases have obviously helped you close that gap nicely in terms of impact on overall P and L. I guess I'm indirectly asking.",
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          "start_time": "00:52:40,532",
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          "text": "About sort of whether there's more room.",
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          "start_time": "00:52:42,684",
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          "text": "To push lift pricing higher here from whatever trends you have in front of you, from whatever you your whatever early read you might have into lift pricing.",
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          "start_time": "00:52:51,644",
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          "text": "Thank you.",
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          "start_time": "00:52:52,036",
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          "text": "And I have a quick follow up.",
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          "text": "Okay. If I'm interpreting your question correctly, I There's a couple of areas that we still see for growth and we are still very focused on that vision that you just articulated in terms of what we're trying to achieve is the percentage of our lift revenue that's committed in advance. And there's a couple of areas that we think are still opportunities. Obviously we still have lift ticket guests that our goal is to convert them into a pass. We also see in under penetrated markets and destination markets that there's still we are not maxed out or at a maturity level of where we can be with pass for the number of skiers in those markets and the opportunity to convert those. And then there's the database which we have, you know, over we have over 2.3 million passholders, but we have over 25 million marketable guests in our database. And so the key for us is how do we connect with them in a relevant way and bring them in to our network of resorts. So those are all opportunities for growth. When I think about lift tickets versus Pass, you know, we are not focused on lift ticket pricing being lower to drive volume. Right. That is a short term, not short term and refundable decision. So we do price our lift tickets to reflect the experience we're delivering, but also to encourage people to make a commitment in advance and that there's a value to the exchange that people are making to buy a pass, which is we're asking you to make a non refundable commitment to us and for the whole season and our network of resorts. And in exchange we're giving you that incredible value. Every year we look at the price elasticity data and the behavioral data that we have to decide what are the resort lift ticket prices going to be and what are the pass prices going to be right now where we landed coming into this season with our past results and where we are on lift ticket pricing. I'm very pleased with the balance that we have between those two. And I think one last thing I'll just mention to remind people, because people often think about lift ticket prices and they think about Vail Mountain is we have a really large portfolio, 42 owned and operated resorts that cover a very wide spectrum of different types of skiers and different price points as well. But we look at it constantly and adjust when we see data or behavior that we think we need to make adjustments to our approach.",
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          "text": "Thank you very much. And then one quick one. You know, I know you haven't given guidance on this outside of Capex, but whatever you could share directionally would be helpful. I was wondering if you could detail what kind of opex you are including in your guidance for 2025. For my EPIC year, anything directionally would be helpful. Hi Arpi Na. Yeah, we do not disclose what we're including in there for OPEX related to this. As we talked about it is early. This is our first year of rollout. We have a lot of the infrastructure already in place. So if you think about what we're doing to drive this incremental business. Right. You can think about that in terms of the capital that we announced. But then on the operating expenses there'll be some incremental variable costs that will come with delivering that experience. But we haven't provided specific guidance.",
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          "text": "Got it.",
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          "text": "Thank you very much.",
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          "text": "I'll just build on that to reinforce the point that this is a brand new business model that doesn't exist really in the ski industry right now. So obviously there is an awareness and a trial and conversion plan associated like there would be with any business. But we are also quite fortunate, as Angela said, that we're already heavily in the gear business in rental and retail and have substantial infrastructure. So really connecting the existing infrastructure we have and utilizing it in a different way to deliver a completely different business model we're focused on.",
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          "text": "Thank you very much.",
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          "text": "Thank you.",
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          "text": "Thank you. We'll go next now to Paul Golding at Macquarie Capital. Thanks so much. Just a quick question to start with on Australia. Just wanted to separate the commentary around the performance over this past season. It seemed like there was a comment in the press release about lower demand and Just wanted to understand where that's coming from. Is that just comping the normalization they were a season behind post Covid, or is that relating to some other structural dynamic there?",
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          "text": "Thanks, Paul. This past season, winter season in Australia, we had historic challenging weather conditions and snow conditions. So that really impacted the demand at the Australian ski resorts.",
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          "text": "Got it. Thanks, Angela. And then another question around this delayed decision making due to prior year weather. Just wondering if there are any other levers left to overcome some of this delayed decision making, aside from the natural escalators that you have in past price and better weather conditions in the preceding year, obviously, which wouldn't have you in the delayed decision making situation with some of the resorts. So just wondering, any other levers you have that you're considering whether it's bundling or something on the lodging front or otherwise to help give more visibility earlier in the selling season to what season dynamics might look like. Thank you.",
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          "text": "Thanks, Paul. Yeah, we are ideally, we would love to have, you know, all of our passholders committed in the spring. And we've been quite successful over time in moving a behavior that used to occur one or two weeks before someone decided to show up on their ski vacation and moving that earlier and earlier in the selling cycle. This year, as you noted, we did see some delayed decision making coming off of a tough season. So as we head into next year's pass sales, we always do a situation assessment on the business. What worked, what didn't work, what are the things that we want to change? And that is a dynamic, Paul, that we always look at, which is, well, what are the different incentives for our guests to commit as early as possible? Does anything need to change? Obviously those passes for next the following season are not going on sale yet. So I'm not going to divulge any of the things that we're thinking about, but we do look at it every year and we're constantly striving to pull that decision making and make it worthwhile for our guests to want to commit to us as early as possible. More to come on that.",
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          "text": "Great, thanks.",
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          "text": "Thank you.",
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          "text": "And we'll take our final question today from Brandt Montour of Barclays. Hey, good afternoon, everybody. Thanks for squeezing me in here. So first question is on Whistler. Kirsten, I want to make sure I'm just not reading too deep into your comments about destination guests being important here. But I guess the question is I know Whistler has probably a very large relative mix of international guests and guests traveling from afar. And so is there any sort of dynamic whereby if you don't, there's a lag related to those folks having to book farther out and if you get too far into the season without seeing a recovery in those bookings and you might not be able to make that up even in a really good weather season, or is that not really the dynamic there?",
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          "text": "I can't say I'm anticipating anything like that right now. The fact that Whistler Blackcomb is off to such a great start with the amount of terrain that's open, the snow conditions, you know, last season was a tough season at Whistler Blackcomb. So getting out of the gates really strong early here, you know, the hope is that, that then our international guests and our domestic destination guests are thinking about and planning their ski vacations at this time for the season and that it has a positive impact on it. So at this point, I can't say that, you know, I'm anticipating, we're so early in the season right now, I'm not anticipating that there's, you know, some threshold that we're going to go past this early where it becomes difficult for people to book their vacations. What I am seeing with the Whistler lodging data is with each reporting cycle that comes out on that, those lodging bookings, it seems to be improving and moving in the direction that we would want it. So, yeah, just wanting to be transparent about what we're seeing in those early indicators. And we are fortunate that that early snow is a real positive and hopefully influences people to want to book their vacations there.",
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          "text": "Okay, great, that's helpful. And then just following up with a high level question about the east coast specifically, you know, looking back at the last couple years, obviously really tough weather, but you know, looking through the lens of, you know, weather potentially shifting warmer, even permanently warmer, even if it's marginally. I'm curious if in your long term planning you've thought about adjusting your operating model at any of those mountains to account for that in order to maximize cash flow as well as the strategic importance of those mountains?",
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          "text": "Yeah, Brant, we're always looking at our operations and our operating model across all of the resorts and particular in the east making sure, because that geography is relatively new for our company or newer for our company. So our Mountain Ops teams are constantly learning and looking at what adjustments they need to make given the variability that occurs in the East. And then obviously we're focused on geographic diversity. We think being in the east is really important because it has access to some major metropolitan markets where there's a lot of skiers. And that has a big impact on our pass sales, to have that access and that connection in our network. But the geographic diversity of our company, to have a strong presence in the Rockies, a strong presence in the west with Whistler Blackcomb in Canada as well as the east, to balance out where we have challenges is hopefully the goal, even when there's some weather variability.",
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          "text": "Great. Thanks everyone.",
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          "text": "Thanks Brandt.",
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          "end_time": "01:04:28,600",
          "text": "That is all the time we have for questions today. Ms. Lynch, back to you for any closing comments.",
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          "text": "Thank you, Operator. This concludes our fiscal 2025 first quarter earnings call. Thanks to everyone who joined us today. Please feel free to contact Angela or me directly should you have any further questions. Thank you for your time this afternoon and Goodbye.",
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          "text": "Thank you, Ms. Lynch. Again, that does conclude today's Vail Resorts fiscal first quarter 2025 earnings conference call and webcast. You may disconnect your line at this time and have a wonderful day. Goodbye everyone.",
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  {
    "call_id": "Eli Lilly Q2 24",
    "call_title": "Eli Lilly Q2 24 Conference Call",
    "symbol": "Eli Lilly Q2 24",
    "start_time": "2025-01-08T18:40:49Z",
    "end_time": "2025-01-08T18:41:20Z",
    "duration": 0,
    "status": "COMPLETED",
    "created_at": "2025-01-08T18:40:49.439982Z",
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      "call_id": "Eli Lilly Q2 24",
      "text": " Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q2 2024 earnings call. @ this time, all participants are on a listen only mode. Later, we will be conducting a question and answer session and instructions will be given at that time. Should you request assistance during the call, please press star then zero and an operator will assist you offline. I would now like to turn the conference over to your host, Joe Fletcher, Senior Vice President of Investor Relations. Please go ahead. Thanks Paul and good morning everyone. Thanks for joining us for Eli Lilly and Company's Q2 2024 earnings call. I'm Joe Fletcher, Senior Vice President of Investor Relations and joining me on today's call are Dave Ricks, Lilly's chair and CEO Dr. Dan Skavronski, chief Scientific Officer and President of Lilly Immunology Gordon Brooks, Interim Financial Chief Financial Officer Anne White, President of Lilly Neuroscience Ilya Ufa, President of Lilly International Jake Van Narden, President of Lilly Oncology and Patrick Janssen, President of Lilly Cardiometabolic Health and Lilly usa. And we're also joined by Mikayla Irons, Mike Springnether and Lauren Zuerky of the IR team. During this conference call, we anticipate making projections and forward looking statements based on our current expectations. Our actual results could differ materially due to several factors, including those listed on slide 4. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10K and subsequent filings with the SEC. The information we provide about our products and pipeline is for the benefit of the investment community. It's not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non GAAP financial measures. Now I'll turn the call over to Dave. Thanks Joe. It's an exciting time here at Lilly as our growth trajectory accelerated in the second quarter. Our investments in advancing innovative medicines and our focus on manufacturing expansion are bringing Lilly medicines to more people around the world. On slide 5 you can see details of the financial performance in the second quarter and progress related to our strategic deliverables. Revenue grew 36% in Q2 with our new products growing nearly $3.5 billion compared to the same period last year. US demand for Manjaro and Zepbound is strong and growing as access and supply continue to expand. While weekly prescription volume was volatile in the first half of the year due to challenges fulfilling high demand, our progress on supply gives us confidence in our outlook. Q2 saw impressive performance across other areas of the business as well, excluding the sale of the rights to Baxemi. Last year non ANKERTON Growth was 17% worldwide with growth spread across geographies including 25% growth in the United States. And our $3 billion increase in revenue guidance reflects our expectation that momentum will accelerate through the balance of the year. We achieved several key pipeline milestones including the approval of Kisunla, the brand name for Donanemab in the US for the treatment of Alzheimer's disease the approval of Jperka in Japan for people with relapse or refractory mantle cell lymphoma who are resistant or intolerant to other BTK inhibitors, the submission of Tirzepatide in the US and the EU for the treatment of moderate to severe obstructive sleep apnea in adults with obesity and the positive top line results from the summit phase 3 trial evaluating tirzepatide in adults with heart failure with preserved injection fraction and obesity Lilly now has a significant opportunity to create new medicines through a broad internal portfolio in active business development to support our long term growth in obesity. Our strategy is to comprehensively address this global public health crisis, pursuing opportunities against every rational mechanism, indication and dosage form. We are investing broadly in this disease and now have 11 new molecules currently in the clinic across multiple indications. We're also investing in a wide range of late stage phase three programs. We recently shared the positive data of tirzepatidin, OSA and FPAF orforgipron, our oral GLP1 small molecule has a comprehensive phase three program underway in diabetes and obesity with nine trials currently running and readouts starting mid next year with ritatrutile, our GIP GLP1 glucagon triagonist. We have initiated a broad phase three development program studying the molecule in obesity, OSA, osteoarthritis, cardiovascular and renal outcomes as well as type 2 diabetes. These readouts start in 2026. A top priority remains executing on our ambitious manufacturing expansion agenda. In May we announced plans to invest an additional $5.3 billion in our Lebanon, Indiana manufacturing site, bringing our total investment there to $9 billion. We believe this is the largest single investment in synthetic medicine active pharmaceutical ingredient manufacturing in the history of the United States. Importantly, this expansion will enhance capacity to manufacture active pharmaceutical ingredients for Zepbound and Mounjaro. Since 2020, we have committed more than $18 billion to build, upgrade or acquire facilities in the U.S. and Europe and we've begun to see the benefit of these investments. We are making near term progress to ramp production, including at new sites like Research Triangle park, existing Lilly sites, and at contract manufacturing organizations. Our Concord, North Carolina site is progressing well. We're in the process of running validation and expect this facility will initiate production by the end of 2024 with product available to ship in 2025. We also continue to make progress on different presentations for Tirzepatide. We have now launched our multi dose Quick Pen in multiple markets outside the US with positive early indicators of patient adoption and in Gordon's remarks he will preview our plans to launch vials here in the U.S. lastly, in terms of external innovation, in July we announced a definitive agreement to acquire Morphic, a biopharma company developing oral integrin therapies for treatment of serious chronic diseases, including a phase 2 asset being evaluated in inflammatory bowel disease. On slide 6, you'll see a list of key events since our Q1 call, including the milestones I mentioned earlier and several other important updates as we announced in June, Anat Ashkenazi resigned as Lily's Chief Financial Officer to become the CFO of Alphabet. We wish Anat well in her new role and thank her for her partnership and leadership of our financial organization over the last three years. We have named Gordon Brooks Interim CFO as an internal and external search for Anat successor is currently underway. Gordon has been with the company for 29 years and also serves as our Controller and the leader of the Corporate Strategy Group for the company. In other leadership news, Alonzo Wiens, our Executive Vice President of Enterprise Risk Management and our Chief Ethics and Compliance Officer, will retire at the end of the year after 27 years of service. And Melissa Seymour has joined the company as Executive Vice President of Global Quality and a member of the Company's Executive Committee following John and Norton's recent retirement. I want to thank Alonzo for his many years of service and welcome Melissa to the Lilly team. Now let me turn the call over to Gordon to review our Q2 financial results. Thanks Dave. So I'm on slide 7 which summarizes the financial performance in the second quarter of 2024. Second quarter revenue growth of 36% was primarily driven by Mancharo and Zetbond as well as Visenio when excluding revenue from the sale of rights to Baqsimi. In Q2 of last year, revenue grew 46% gross margin as a percent of revenue increased from 79.8% in Q2 of 23 to 82% in Q2 of 24. Gross margin in the quarter benefited from favorable product mix and higher realized prices partially offset by higher production costs. R and D expenses increased 15% driven by continued investment in our portfolio and in our people. Marketing, selling and administrative expenses increased 10%, primarily driven by promotional efforts associated with ongoing and future launches as well as investment in our people. Operating income increased 90% in Q2 driven by higher revenue from new products, partially offset by operating expense growth. The effective tax rate on a non GAAP basis was 16.5% in Q2 of 24 compared with 16.1% in Q2 of 23. The Q2 24 tax rate reflects a mix of earnings in higher tax jurisdictions, while the Q2 23 rate reflected the impact of earnings from the sale of rights for Baqsimi. At the bottom line, we delivered earnings per share of $3.92 in Q2, an 86% increase compared to the prior year. Q2.24 results include the negative impact of $0.14 from acquired IPR and D charges compared to $0.09 in the prior quarter. Q2 of 23 On Slide 9, we quantify the effects of price rate and volume on revenue growth. US revenue increased 42% in Q2. Volume growth of 27% was driven by Zbond, Manjaro and Visenio, partially offset by the sale of rights for vaccine in Q2 of 23 and decline centralicity. Realized prices increased 15% largely driven by Manjaro Access and Savings card dynamics. As noted in our Q4 Q1 2024 earnings call, unprecedented demand for our ingredient medicines led to wholesaler back orders at the end of Q1. In Q2 we fulfilled the majority of these backorders, improving wholesaler stocking levels. We estimate that us, Majara and zipbound aggregate sales in the second quarter were positively impacted by channel stocking that we estimate totaled high teens to mid-20s as a percent of US sales as we rebuilt inventory from extremely low levels in the spring and to account for the growth of these brands. We're pleased that the improved supply situation is reflected on the FDA shortage website which currently shows all doses of Manjaro and Zepbound listed as available and the two lower doses of Trulicity listed as available. While wholesaler back orders in the US have been reduced substantially, it's important to note that the pharmaceutical supply chain is complex, more so for medicines that require reprituration and offer several different doses. These factors may continue to result in variability in the patient experience at the pharmacy counter. While supply and demand has come into better balance, we expect increases in demand may result in periodic supply tightness for certain presentations and dose levels. We have a continued broad agenda to further increase supply and we'll continue to look at all options. Today we are excited to announce plans to further expand access for Zepbound with the launch of the 2.5 milligram and 5 milligram single dose vials in the coming weeks with more details to come at that time In Europe, revenue grew 20% in constant currency primarily driven by Manjaro launch uptake. In the UK and Germany we also had strong volume growth from Vesenia and Jardiance which was partially offset by decreased volume from Trulicity. Japan performance was strong in the second quarter with 15% revenue growth in constant currency. Volume growth of 21% was driven by uptake of Manjaro and Visenio. Moving to China, Q2 revenue increased 1% in constant currency growth was driven by Tibit Allumiant and Tulce, partially offset by Trulicity and Cialis. Manjaro was recently approved in China for type 2 diabetes and chronic weight management. We have not yet announced expected launch timing in this market. Revenue in rest of the world increased 61% in constant currency primarily driven by Majora volume growth from demand and channel dynamics. Slide 10 provides additional perspective on performance across our product categories. Zenio Solid growth in the second quarter across major geographies with worldwide sales increasing 44% driven by the early breast cancer indication. J Burker revenue increased to $92 million worldwide which included a $19 million partner milestone payment related to Japan. JP Hoca continued impressive quarter over quarter growth building on the brand's uptake from both the MCL and CLL patient populations onboard. Launched in the US and 14 international markets with sales of $26 million in Q2. These launches continue to progress well with increasing patient starts and in the US we expect sales to accelerate as the product specific J code went live on July 1st. Mounjara sales in Q2 were $3.1 billion globally with $2.4 billion in the US. Revenue growth in the US reflected continued strong demand as well as the improved channel dynamics discussed earlier. We're seeing solid uptake of Majaro outside the US with sales in Q2 totaling $677 million in the first half of the year. We launched the Quick Pen presentation in the UK, Germany and the UAE so far in Q3. We have also launched Majara Quickpen in Spain and plan to launch in additional markets throughout 2024. In Q2 worldwide Tralicity revenue declined 31%, US Trulicity revenue decreased 36% driven by lower volume primarily due to competitive dynamics and supply constraints, partially offset by improved wholesaler stocking levels on certain doses. Turning to Slide 11, we have an update on the US launch of Zeb Bound. We've seen exceptional growth trends for Zeb Bound that have accelerated as production has ramped leading to sales of over $1.2 billion in Q2. We are rapidly building out formulary coverage for Zeppelin in the US and as of July 1st had approximately 86% access in the commercial segment. We estimate over 50% of employers have opted in to anti obesity medicine coverage and see that modestly growing as we work to expand coverage. On Slide 12, we provide an update on our capital allocation. Slide 13 shows our updated 2024 financial guidance. We are raising our full year revenue outlook by $3 billion to be between $45.4 billion and $46.6 billion. This increase is due to strong performance across our non increment medicines as well as Manjaro and Zeb Bound. Additionally, we've improved clarity into the timing and face of our production expansion and Mounjaro launches outside the US we achieved a number of supply related milestones in Q2 and have increased confidence regarding our expectation that production of saleable doses of incredent medicines in the second half of 2024 will be at least one and a half times the saleable doses in the second half of 2023. Based on the midpoint of the range, our updated guidance implies revenue growth of 38% in the second half of the year following 31% in the first half. In the second half of the year, we expect a more significant growth in Q4 compared to Q3. Given the update to Revenue guidance, we now expect the ratio of gross margin less OPEX divided by revenue to be in the range of 36 to 38% on a reported basis and 37% to 39% on a non GAAP basis. For other income and expense, we now expect between $525 million and $425 million of expense on a reported basis and between $400 million and $300 million of expense on a non GAAP basis. Both ranges reflect lower expected net interest expense and the reported range reflects net losses on investments in Equity Securities. Through Q2 of 24, we have increased our estimated effective tax rate to be approximately 15% driven by changes in our forecasted mix of earnings in higher tax jurisdictions. Earnings per share is now expected to be in the range of $15.10 to $15.60 on a reported basis and $16.10 to $16.60 on a non GAAP basis. Both ranges reflect the updates mentioned earlier as well as acquired IPR and D charges through Q2 of $0.24. The reported range includes a charge in Q2 of 24 associated with anticipated litigation payments. Now I'll turn the call over to Dan to highlight our progress on R. And D. Thanks Gordon. It's been another busy quarter. I'll start with comments on the Kacinla FDA approval, then the Tirzepatide heart failure phase three readout, and finally I'll cover the rest of the updates for the quarter. We are of course very excited about the FDA approval of Kacinla for treatment of Alzheimer's disease. This followed the June advisory Committee meeting where we had another chance to present and discuss the compelling data package characterizing the safety and efficacy of this medicine. We were pleased by the discussion of the FDA advisors, particularly with regard to our data supporting stopping of Kacinla therapy when amyloid plaques are removed to minimal levels. In our trial, nearly half of study participants completed their course of treatment with Kacinla in 12 months. We believe limited duration therapy along with a once monthly infusion schedule could result in lower patient out of pocket treatment costs and fewer infusions required. The vote was unanimously positive on all questions presented and a few weeks later the FDA approved Qacinla, including labeling that physicians may consider stopping dosing of Kusunlot based on reduction of amyloid plaques. Following the July approval, we launched Kasunla and we're delighted to see that patients have already begun receiving this New Lilly medicine as part of clinical practice. We note that Kasunla is broadly covered for Medicare patients through approved CED registries. Regulatory reviews continue around the world with potential action, yet this year in several countries. We're pleased to have recently received a positive opinion for Dinenumab from the Pharmaceuticals and Medical Devices Agency in Japan. And finally, our phase three prevention study, Trailblazer ALS3 continues to progress as planned. Moving to tirzepatide on slide 14 you'll see the recent positive results of our summit phase 3 trial which evaluated tirzepatide for the treatment of heart failure with preserved ejection fraction and obesity. This study demonstrated statistically significant improvements in both primary endpoints for tirzepatide maximum tolerated dose compared to placebo. In the first primary endpoint, tirzepatide reduced the risk of worsening heart failure by 38% compared to placebo as measured by a composited outcome of of heart failure, urgent visit or hospitalization, oral diuretic intensification or cardiovascular death. The median follow up for this endpoint was 104 weeks. In the second primary endpoint, tirzepatide significantly improved heart failure symptoms and physical limitations compared to placebo as measured by the Kansas City Cardiomyopathy Questionnaire KCCQ Clinical Summary Score. Mean changes from baseline in this measurement is 24.8 points or tirzepatide while placebo was 15 points based on the efficacy estimate at 52 weeks. All key secondary endpoints were met in the study, including mean body weight reduction of 15.7% compared to 2.2% for placebo. The overall safety profile of tirzepatide in the Summit trial was consistent with previously reported tirzepatide studies including surmount and surpass. We will present detailed results at an upcoming medical meeting and submit to a peer reviewed journal. We plan to submit results to the FDA and other regulatory agencies starting later this year. In other updates across our portfolio, Slide 15 shows select pipeline opportunities as of August 6th. Slide 16 shows potential key events for the year. I'll start with updates in Cardiometabolic Health, which is the new name of our internal business formerly known as Lilly Diabetes and Obesity. In June, we published detailed results for our phase 3 trials of tirzepatide for the treatment of moderate to severe obstructive sleep apnea and obesity in the New England Journal of Medicine, and we presented results at the American Diabetes association meeting. All primary and key secondary endpoints were achieved in these studies, notably in one of our key secondary endpoints. As shown on slide 17, tirzepatide demonstrated that up to 51.5% of participants met the criteria for disease resolution of sleep apnea. We've now submitted tirzepatite for the treatment of moderate to severe obstructive sleep apnea and obesity to the FDA as well as the ema. We are pleased that the FDA has granted breakthrough therapy designation and we expect US regulatory action as early as the end of 2024, which would be dependent on the FDA granting priority review. Also in June we published results in the New England Journal from our phase 2 trial of tirzepatide for metabolic dysfunction associated steatohepatitis or MASH with stage two or three fibrosis, and we presented these results at the European association for the Study of the Liver. We were pleased to show that in a secondary endpoint, more than half of the patients taking tirzepatide achieved improvement in fibrosis of 52 weeks as shown on slide 18. We engaged with regulatory authorities on a potential phase three registration strategy and were also encouraged by the potential read through of these results to retatruta, which also showed significant improvements in liver fat in Phase two. This quarter we also announced top line data from two phase three trials for our once weekly insulin called efsatorin alpha. The Quint2 and Quint4 trials for the treatment of type 2 diabetes each met their primary endpoints of non inferior A1C reduction. Quint2 compared Upsitora to once daily insulin Degludec for 52 weeks in insulin naive adults. Quin4 compared Epsila to insulin Glargine for 26 weeks in adults previously treated with daily basal insulin and at least two injections per day of mealtime insulin in both Quint 2 and Quint 4 APSLaura was safe and well tolerated. Detailed trial results will be presented in September at the European association for the Study of Diabetes Annual meeting. We look forward to sharing additional data from the QUINT program later this year. We're pleased with our progress to provide breakthrough innovation to patients who require insulin, progressing our glucose sensing insulin receptor agonist molecule in Phase one and investing in approaches aimed at disease modification for type 1 diabetes such as islet cell therapy. In other late phase updates, we've initiated triumph outcomes, a phase 3 trial evaluating cardiovascular outcomes and renal function for patients taking retatrutide. Earlier in our cardiometabolic pipeline, you'll see additional incretin molecules in Phase one. Incretins are an important part of our portfolio strategy and having multiple molecules in clinical development offers us potential optionality as we look at opportunities to help patients across mechanisms, indications, dosages, formulations and treatment schedules. To Highlight A Few Glip1 NPA2 is a small molecule non peptide agonist of the GLP1 receptor designed for once daily oral administration. We expect this asset to move to phase two later this year, so we now identify it on our pipeline slide, whereas it had previously been listed as not disclosed. Given the diversity of indications to potentially pursue with incretins, we are excited about the possibility of having another oral option to help more patients with different diseases. We also highlight today Gipglip1Co Agonist3, which is a next generation dual agonist molecule and we are planning to explore weekly and monthly dosing given its longer half life. Elsewhere in our cardiometabolic health portfolio, we have stopped development of an NRG4 agonist as the profile was insufficient for further clinical development. Turning to oncology, we are pleased that Jperka has now been approved in Japan for people with relapsed or refractory mantle cell lymphoma who are resistant or intolerant to other BTK inhibitors In early phase oncology, we've initiated the phase 1 trial for a second nectin 4 ADC. We view this as an important target and having two compounds in the clinic provides more opportunities to improve outcomes for patients. We've also initiated a phase one trial for our ADC targeting the folate receptor. This asset, which came from our acquisition of mablink, is a next generation construct designed to have efficacy at all folate receptor expression levels and with an improved therapeutic index relative to existing agents. We're also announcing that We've terminated the LOXO783 program which targeted PI3 Kinase Alpha. We evaluated the ongoing clinical data from the program and compared the molecule to next generation candidates that we have progressed from our discovery efforts. We believe our next molecules have greater potential to benefit patients. We look forward to putting our next candidate into the clinic in 2025 and sharing more about its profile later this year. In Immunology, we've now submitted Miracizumab for the treatment of moderately to severely active Crohn's disease. In Japan, we've terminated development for our GITTER antagonist due to insufficient efficacy. We also announced our acquisition of morphic and pending completion of the deal, we plan to reflect the oral alpha 4 beta 7 integrin inhibitor MORF057 in phase 2 for ulcerative colitis and Crohn's disease. Finally, in neuroscience, our anti tau small molecule OGA inhibitor recently concluded its phase two study in early symptomatic Alzheimer's disease. OGA failed to meet the primary endpoint of decreasing the change from baseline as measured by ADRASM in either of the two dose levels tested. We're reviewing the data for presentation of detailed results of the study at the Clinical Trials on Alzheimer's Disease conference later this year. While this negative outcome was disappointing, we remain committed to tau as a high conviction target in Alzheimer's disease and plan to continue studying tau biology and I'll turn the call back to Dave for closing remarks. Thanks, Dan. Before we go to Q and A, let me briefly sum up our progress in the second quarter. Exceptional revenue growth in Q2 was driven by Manjaro, Zepbound and Brazenio. We are pleased with the ramp in production in the first half of the year and expect continued expansion ahead. Significant advances in our pipeline include the approval of Kisunla for Alzheimer's disease, the submission of Tirzepatide for moderate to severe obstructive sleep apnea and obesity in the US and Europe, and positive results from the Phase 3 study of tirzepatide for heart failure with preserved injection fraction and obesity. We are investing in product launches, the advancement of our pipeline, as well as our ambitious manufacturing expansion agenda. All of this and the incredible work of our teams around the world give Lilly leadership confidence that we have a very bright future ahead and better opportunity than at any time in our history to impact human health on a global scale. Now I'll turn the call over to Joe to moderate the Q and A session. Thanks Dave. We'd like to take questions from as many callers as possible and conclude our call in a timely manner so consistent with prior quarters. We'll respond to one question per caller. So I ask that you limit to one question per caller as we'll end the call at 11am if you have more than one question, you can re enter the queue and we'll get to your question if time allows. So Paul, please provide the instructions for the Q and A and we're ready for the first caller. Thank you. At this time we'll be conducting a question and answer session. If you have any questions, please press star1 on your phone at this time. We ask that participants limit themselves to one question on today's call. If you do have a follow up question, please rejoin the queue by pressing one at any time. We also ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we pull for questions. And the first question today is coming from Seamus Fernandez from Guggenheim. Seamus, your line is live. Oh great. Thanks so much. And just sticking with my one question, it really is on your awareness of ASP movements in the market. So the average selling price, by our calculations, when we sort of look at the ASP averages, removing rebates, inventory, et cetera. Relative to comments made yesterday on Novo's call, I'm just trying to get a better understanding of what you're seeing in. The market with regard to average selling price. The prices look actually reasonably close to. Us with the Tirzepatide franchise having higher. You know, sort of ASP per scrip. But not dramatically higher, you know, given. Concerns of real pricing deterioration. I guess the only question that I have here is what are you seeing from an ASP perspective? And do you see this as kind of the natural evolution of this market as competition emerges as we saw with Ozempic historically and Trulicity in 2019. Thanks so much. Thanks Seamus. I think I'll go to Gordon. Do you want to touch on that or Patrick? Sure, I'll cover that. Seamus, thanks for the question. Yeah, so just on price trends, initial favorability in the first half of the year was driven by Majaro. That goes away in the second half of the year as the CO pay program moves out of the base period. In terms of pricing, we see stable pricing sequentially across quarters in 24. So nothing unusual. Q1 to Q2 and our guidance Q3 and Q4 continues stable sequential pricing for the second half of the year. When you don't have the Majaro dynamic pricing, the second half will be similar to prior year pricing. So those are kind of the dynamics we see in pricing. Good. Paul, next question. The next question will be from Terence Flynn from Morgan Stanley. Terrence, your line is live. Great. Thanks for taking the question. Congrats on all the progress on the manufacturing. Maybe just a two part for me on that one. Just wondering if your initial guidance for. The at least 1.5-fold increase in sellable doses include the Zepbound starter vials that you're rolling out in the US or if that's a potential driver of upside. And then as we think about rtp, I know you're continuing to make progress there. The script suggests you're at about a third of the way through the ramp to peak, but this inventory restock that you talked about today suggests maybe more of a meaningful step up. So just can you quantify for us. Where you are in the ramp in rtp? Thank you. Yeah, sure. Dave, you want to hop in? Yeah, I can just handle. So I think what we're saying today is just reiterating that 1.5 is sort of like a floor on how we think about second half volume. I would say the vials are part of that. But you know, given the we've got 20 weeks left in the year so there's a limit to how much of that will ship anyway. But they certainly open up a node of the most constrained part of the supply chain, which is spill finish and the final container closure. And it uses different lines obviously than syringes or cartridges, so it just adds to our capacity. Probably the most meaningful part of that will show up in early 25 to be honest, as that new form ramps and details on that rollout will be coming in the coming weeks. As it relates to RTP, I wouldn't read through that the Q2 step up in volume we shipped was primarily due to rtp. That site is on track and we are steadily escalating production per our goals. I also mentioned Concord is doing well against its time schedule and we expect product out of that site end of this year, early next year, but rather maybe performance out of the totality of the network. That allowed us to recover wholesaler inventory levels in Q2 and now come off the FDA shortage list. It's more just overall performance across many, many nodes of our supply network. Thanks Dave Paul Next Question the next. Question will be from Chris Schott from JPMorgan. Chris, your line is live. Great. Thanks so much for the question and congrats on all the progress. There seems to be a broader debate on the role emerging earlier stage competition in the obesity market could play where that fits in the market broadly. I'm sure you're not surprised by the breadth of agents being developed in the space, but just interested in your latest views in terms of barriers to entry you see for some of these newer competitors and how you think about defending Lilly's market position over time. Thank you. Maybe Dan, do you want to start on that and then yeah, I'll start. With some R and D comments on bearish entry. The first, I think is having a successful drug in phase 3 clinical trials and getting it approved. You can see that we've invested thoroughly, say in our Phase three portfolios, often pursuing multiple indications in multiple populations at once, just being able to get to that point. I know investors have gotten excited about various releases of Phase one data, but it's still a challenging space to develop drugs and we usually wait until we've seen pretty robust Phase two data before we get too excited about a particular molecule. So that's the first thing. And I think a lot of the news that we've seen from different companies will probably sort out as we get to seek Phase two data and which molecules make it and which have the right profile and which don't. But I wouldn't be expecting 100% success here. Maybe a few additional comments. I think when we look at the marketplace there are two very important barriers. We have been extremely successful in gaining access across both Monjaro, where we have currently 93% access in commercial and 89 in Part D and similarly for seppbound 86% after seven months in the marketplace, that's quite significant. The second piece is the amount of outcome indications. We are investing heavily in both Mounjaro and Sebbound and similarly for the Phase 3 assets of Oglepron and retathretide. So I think overall we think that we are extremely well positioned to compete here and we are not surprised to see that most of the firms are actually leaning into this very important space. But with the cost we have in our hands in the market today, the phase three assets and what we refer to in the prepared remarks, we are well positioned to compete today and tomorrow. That goes across both different indications. Assets, dental therapy, et cetera. All hands on deck on our side. Maybe one last thing to pile on, but here we're highlighting our pipeline data. 11 assets, all different targets. Maybe just a reminder, Chris, we had our phase one mad data for tirzepatide in 2016. That was eight years ago. And that's a massive lead, I think over other GIP GLP agonists that are behind us. On the oral side, you can get more in category differentiation based on target engagement, safety profiles, et cetera. But here again we have the most advanced program and as Dan highlighted today, a follow on program to add to that sort of portfolio we have there. Finally, one other, I don't know if it's a barrier, but certainly it's work to do is scaling manufacturing. The volume is really high in this category. Probably wind up being one of the highest volume categories in the history of the industry. And you're talking about making things on the billion scale, which takes time and is technically difficult and very capital intensive. So of course competitors will come. But there's a road ahead for all these that the two leading companies have already walked in large part. Thank you all. Next question. Paul, the next question will be from Tim Anderson from Wolff Research. Tim, your line is live. Thank you. I have a question on compounders of GLP1s, including, you know, but not limited to your Tirzepatide. So companies like hims or anyone else, how can this not infringe patent protection? And is this something that is likely to get adjudicated in the courts, meaning that you and presumably Novo sue. An article, you know, just yesterday in the New York Times talked about patients getting upside down with compounded GLP1s. I think they used the term overdosing on these compounded formulations. So, you know, not only do compounders take away sales from you guys, but it could also tarnish the reputation of the class. So what can we expect Lilly to do about it? Thanks, Tim. Daniel, want to start with some comments? Yeah. Thanks for raising this important topic, Tim. Of course we've been watching this carefully. Not, you know, really out of concern that they're Taking away our business. As you know, we've been largely supply constrained here, but rather the impact it's having on patient health. We often are able to secure samples from these kinds of compounding labs and analyze them in our own labs. And what we find for the most part, in most instances is this isn't compounded tirzepatite at all. Our drug is not available to compounders. Rather they're purchasing either other chemicals entirely, which we often find, or fake producers of tirzepatide that is often full of impurities, sometimes contaminated by bacteria. This is a safety risk to patients that we take seriously and trying to do everything we can to make patients aware of the potential dangers here so that we can help them. Yeah, and just from a policy standpoint, I mean, you can expect us to be active here. We've taken public positions, we're obviously engaged with regulators and considering all kinds of legal actions and filed some. Of course, you know, compounding is a long standing practice under the 503 provisions of FDA, which is meant to customize doses for individual patient needs that we don't. It's not clear to me medically what that would be for tirzepatide, but I guess that's legal in a sense. It's the mass production that's concerning and we don't see a lot of that with our medicine, more with the other one. But I think if we just step back and reflect on why this is happening. There's shortages because of parental manufacturing constraints in the industry and in the leading companies. A lot of that constraint is investing and proving those processes are compliant with the GMP standards that the FDA and Europe under Annex 1 have enforced. And we agree by the way, with that, strict enforcement. So it's a little odd that the answer to that constraint, which is about raising the standards of the industry to have sterile product, is to create another industry that has non sterile product. So we're just pointing that out and I think you can see Lilly on the front foot here over the coming months to address this. But ultimately the real thing to address is increasing coverage on insurance and increasing supply. We've made a lot of strides in supply. We'll step that up another notch with the availability of vials. And we need to work with primarily the government as well as employers to expand coverage so obesity medicines are affordable. I think when we get to those points, this will be a non issue. But in the meantime, people can get hurt. And as Dan said, it's pretty concerning what's happening. Thanks, Paul. Next Question. Next question will be from Umair Rafat from Evercore. Umar, your line is live. Hi guys, thanks for taking my question. I want to ask on operating leverage, if I may. I know in first quarter when you guys raised the guidance by 2 billion on top line, it dropped down to EPS by $1.3. This quarter guidance went up by 3 billion, but it dropped down at a much higher leverage at 216 EPS, almost a 90% incremental margin. And my question is not so much what your operating leverage is going to be in 2025 or a four year guidance, but instead I'm basically asking if you annualize the momentum of your four Q numbers. Per this year's guidance, the EPS upside implied to consensus could be almost as much as half of Lilly's entire full year EPS where it stands right now. So I'm just trying to think through how do you plan on spending on various functions and what the incremental margins could look like as the revenue momentum really kicks in with the improving supply. Thank you. Thanks Umer. There's a lot of financial mechanics there I'll hand to Gordon to comment on. I think effectively capital allocation considerations. Good, thanks Umar. I appreciate the question. Yeah, I mean we've been speaking for a long time about operating margins and getting to the mid to high 30% range. As we've seen this year, Majora and Tip Bound are taking an inflection point upwards and so we're seeing ourselves at the top end of that range for the first half. Margins are a little inflated. We haven't yet lent into all of our promotional channels and Incretons. You don't see for instance TV commercials on the incretins. We haven't done that. Looking at the. Given the supply situation and in R and D it takes time to scale R and D thoughtfully so it doesn't always move exactly in sync quarter by quarter with revenue. That said, our guidance for the year does indicate we will stay in the upper 30% range for the full year with growth first half. If you look at the first half as the two quarters growth into the second half and you should also expect to see within that mix strong, stronger sales and marketing growth as we get to new launches in the second part of the year. And R and D continue to scale and grow from what we've seen thus far. So those are the dynamics we see on operating margin for 2024. Thanks Gordon. Paul, next question. The next question will be from Mohit Pansal from Wells Fargo. Mohit, your line is live. Great, thank you Very much for taking my question and congrats on the quarter. My question is regarding the rest of. The world sales for Incretins. It seems like Munjaro is doing quite well there and if I take out. The 15% or so for stocking in. The U.S. it seems like ex US is already about 33% this early in the launch. So I would love to understand how has been your experience so far and is there going to be any different uptake for EX US versus your prior generation Incretins for both Mounjaro and Zeb Bound given that these are really efficacious drugs. Yeah, thanks Mohit for the question. Ilya, do you want to comment on OUS rollout for Manjaro? Sure. Thanks Mohit for the question. You know we've seen some great progress with the launch of Manjaro outside of the us. I think what you've seen in terms of growth in the earlier launch countries such as the UK UAE and Saudi. UAE and Saudi are both key markets that make up rest of world, however achieved a leading share and continue to drive momentum and overall market growth. And so as you take a look at Q2 the main driver of that growth has been in Mountjaro in markets where we've already launched earlier in the cycle and majority of that coming from the Quickpen presentation with a lot of that in the uae. Some of that is channel dynamics similar to the us. At the same time if you take a look at Q2 and the trajectory for Q2 relative to historical peak sales of any of our brands, it's already surpassed that with limited number of markets where we've launched. And so as we look at the coming quarters, obviously we just recently launched in Germany and now also Spain with a quick pen presentation we'll also look at monitor the demand and also supply capacity and expect to launch in newer markets. The near term growth I would expect predominantly coming from already launched markets of Nanjaro. Thanks Ilya. Paul, Next question the next question will. Be from Alex Hammond from Bank of America. Alex, your line is live. Thanks for taking the question. In the prepared remarks Dan mentioned engagement with regulatory authorities on a potential pivotal trial and mashed. Can you provide any color on these. Discussions and how Lilly is thinking about trazeptide versus Tortatrutide for this indication? When could we receive updates? Thank you Dan. Yeah, thanks for the question. We're really excited about the opportunity to help patients suffering from mash. I think the data that we shared in phase two purchase appetite is really quite profound in terms of the size of effect we can have. There's a couple issues in mass drug development that we're trying to tackle, probably the most significant of which is the current standard of liver biopsy to identify the patients to enroll in these trials and also to measure the outcome. Liver biopsy is obviously an invasive procedure and difficult to find patients to consent to these trials. And of course, there's risk to patients. We're working hard to develop non invasive biomarkers that can be used to identify the right patients to enroll in match studies and also potentially could be used as an outcome to know if a drug's working. My hope is that we could develop those kinds of biomarkers that could be used for both purposes and could be suitable for accelerated approval of match drugs in the future. Of course, long term, traditional approval for match drugs still requires demonstration of outcomes. So in that environment, we have two drugs that I think could both be great mash drugs. And we'll have to decide whether to invest in one or both of those drugs, depending on the regulatory paths we see. We'll keep investors updated as we make decisions about making sure these molecules are mesh. Thanks, Paul. Next question. The next question will be from Evan Segerman from BMO Capital Markets. Evan, your line is live. Hi, guys. Thank you so much for taking my question. I wanted to touch on manufacturing and. Back in February around the proposed acquisition. Specifically on the concern that you raised. Of Catalan by Novo holdings and the subsequent sale to Novo Nordisk. Are you still as concerned as you were in February or given what you've been able to do with your own footprint, is this less of an issue? Thank you so much. Yeah, I can take it. You know, we remain concerned about that transaction. I don't think it was ever really about the trajectory of our ramp. Although, as we've disclosed, we do rely on one of the catalan sites for GLP1 and other diabetes production. It's more the oddity of your main competitor being also your contract manufacturer and how to resolve that situation. There's also an industry structure issue. You know, CDMOs are important for managing capacity across the sector and if we ended up in an outcome where that sector didn't really exist, they became captive of large pharma would really constrain, I think, availability and the development of medicines, particularly out of biotechs. So we've, you know, aired those concerns publicly and privately since the proposed transaction was announced and we're waiting to see what happens. But in terms of the long term outlook for our company, as you may have Noticed we're building aggressively ourselves. Our primary strategy is self run sites and we've got 18 billion we've announced in the last several years. Probably not done there. And we're quite comfortable building operating sites. And as the newest large sites have begun to come online, we know we can execute that drill and repeat it. That's our base plan. Thanks Evan for the question. Paul. Next the next question will be from Dave Risinger from Learinc. Dave, your line is live. Yes, thanks so much. Let me add my congrats on the. Results as well and the corporate updates. So Zepbound's breadth of health and worker. Productivity benefits seem to be underappreciated by many. You know, there are articles from time. To time that say that, you know, patients need an off ramp from therapy, etc. And my question is what is Lilly. Doing to encourage patients to stay persistent with therapy? And how does Lilly intend to better. Communicate not just zepbound's health benefits but its worker productivity benefits to employers in order to drive much greater employer inclusion of obesity drugs as part of employee benefits? Thanks very much. Thanks Dave. Patrick, do you want to comment on persistency and benefits? Absolutely. You know I think first of all when we look at persistency it's very early after the launch, but based upon the feedback we hear from providers and from patients as well, this is a drug that patients want to stay on because they experience the benefits firsthand of weight loss and also the downstream implications on comorbidities. You are right, the employer opt in efforts are extremely key and we believe that our outcome data OSA now HEFPEV will help us tremendously and more readout to come over the coming years. We're also having value based agreement with several other payers where we are looking into the benefits of the TFC appetite in the workplace in terms of reduced absentees, increased productivity etc. As well. And that has gained a lot of interest in terms of the consumer. Yes, the easy start and stay on is a key priority for us and that we're working with consumers, improving our consumer platforms and also digital channels to really enable patients to experience the benefits that Setbound provides over time. Thanks Patrick. Paul, next question. The next question will be from Kerry Hallford from Berenberg. Kerry, your line is live. Thank you for taking my question. Just going back to the margin question earlier, given you're now expecting your 2024 rating. Apologies team. We will get Kerry reconnected with the better line momentarily. We'll move on to the next question. In the meantime if that's okay. From Chris Shabutani from Goldman Sachs. Thanks, Paul. Chris, your line is live. Yes, thank you. With all the different oral mechanisms, in. Particular variations on it from yourselves as. Well as competitors, can you update us on your thinking on what the basis of competition is going to be and. What kind of opportunities do you really envision? I think there has been for a. While now a comparison on the basis of percent weight gain loss, particularly for the injectables. But as we move into orals, it seems as if tolerability profiles really matter. So how are you thinking about it and how do you recommend investors think. When we compare data sets across these other oral products in development, Even if. The mechanisms are different, how do we. Get smarter about differentiating and interpreting data? Thank you. Anyone chime in? Yeah, thanks Chris. I'll start and we'll see Patrick presenting that on commercial differentiation. But in the clinical trials, first of all, as I was saying before, just take some caution on these small, short phase one trials. There's more to see. Most of the drugs that we've seen actually aren't different mechanisms, they're GLP1 agonists. In this class, I don't expect there to be differentiation in terms of efficacy. Weight loss, you can pretty much dial in the amount of weight loss you want depending on how aggressively you dose it and what population. Tolerability is another issue that usually comes along with the efficacy. The faster you ramp to higher doses, the less tolerability you have. And the different companies will have to work through their own escalation of dosing to match the desired efficacy with some reasonable tolerability. The variable that links those two things together is often the half life of the molecule. So shorter half life molecules will give you bigger peak trough excursions in the pharmacokinetics of the drug. And we think that's what that drives the tolerability issues. So what you want is a long half life molecule that can be dose escalated more smoothly. So that probably will be the differentiation rather than anything that the companies are currently talking about in terms of efficacy. As I said before, it's a long road from early data to phase 3 clinical trials like we have with Orphoglipron and we can expect some attrition. I'm pretty excited also about next generation molecules. All these ones that we've been talking about now are GLP1s and offer efficacy sort of in the range of injectable semaglutide. I think ultimately we'd like to see drugs that offer efficacy and tolerability that exceeds that. Things that could combine multiple incretins like Tirzepatide does. And we are certainly working on orals that could also agonize GIP1, for example. So exciting progress there and more to come on that in the future from. Us, just from a commercial point of view. We are regularly conducting both consumer and provider market research. And when we look into the preferences, the true drivers today is still the degree of weight loss and safety and tolerability. When we look at the needs beyond that, it's actually the need of an oral and an oral with an injectable like efficacy. So that's probably the need that comes beyond what we're currently serving today and particularly to serve those patients that have fear of injections. When we look at other aspects, I think what comes beyond that would be the composition of weight loss, lean mass versus fat and durability. And I think we're looking into all. Of those aspects as well. Thank you and thanks for the answers. Paul, next question. I know we're running short on time, so we'll do our best to kind of compress our answers as we get through as many questions as possible. Paul, thank you. And we have Kerry Holford from Berenberg reconnected. Kerry, your line is live. Lovely. Thank you for taking my question. Hopefully you can hear me better this time around. Much better. Lovely. My question was on margin. So given you are now expecting to land in that mid to high 30s. Range this year so soon after Tirzepatide. Launches, where can we expect your mid term operating margin to land? Is the margin in the mid-40s perhaps higher achievable? And Dave, I know you've previously suggested. That an operating margin above 40% is. Not sustainable for an innovation focused company, but given your progress so far, I wonder if you've changed your view on that. Thank you. Gordon, you want to touch on that briefly? We'll do. Thanks Kerry. Appreciate the question. Yeah, I think, you know, as we said in our guidance, as I said earlier, we do expect to end in that upper 30s range this year. There's still a lot at play here. Yes, on the top line we see inflection points on revenue, but through the first half you've had an inflated position. We haven't yet leaned into any of our promotional channels that that's going to be a dynamic that we lean into more starting in the second half. And R and D, we do intend to scale that and that that's not going quarter by quarter exactly in line with with revenue. So all of those things are still going to play through. You know, I think that said, at this point we're just talking about 2024 and when we do guidance for 25, we'll chat about the longer term picture then. Thanks. Next question, Paul, the next question will be from Akash Tiwari, from Jeffries. Akash, your line is live. Hey, thanks so much. So we're starting to see that myostatins may not be the only way to kind of preserve lean muscle mass. In particular, it looks like amlin gift glip combos are showing the potential for maybe 90 versus 10% fat versus muscle loss. Can you talk about what you think a laurelin tight to zephyrtide combo could. Show, both in terms of absolute weight loss, but also the quality of that weight loss? Thank you. And then where would myostatins fit in a world where next gen amyloid triplets could show that level of muscle preservation? Thanks. We have multiple mechanisms in play here, starting maybe with the amylin. We have a molecule, phase two, called alurolentide, which is a pure amylin agonist. And we're evaluating that both as monotherapy and as in combination with tirzepatide kipglip. So that'll be interesting to see. I don't have strong preconceived notions about what to expect in terms of lean versus fat mass loss with that particular combination. Probably the people who have the most data about that would be the scientists at Novo, since they've investigated criglutide in combination with semaglutide. I think that brings us probably to another mechanism which is dual amylin calcitonin agonism, which cragrelatide probably is a dual agonist. And we have a molecule like that in phase one called Dacra, and we'll also investigate that. And composition of biomass will be one of the aspects in which we evaluate it. And then finally you talk of myostatin. We have a molecule in this family and that's the bimagramab that we acquired from Vernon Stanis, which is an antibody against the receptor. And that's proceeding in a phase two trial in combination with semaglutide. And we look forward to having data to share with that in the future. All of these mechanisms I think could have variable effects on body mass composition. But I point out that so far we've not seen any disadvantages to the types of weight loss that we get with tirzepatide in Fact, patients show improved functional outcomes on a variety of things, including function in heart failure as we just demonstrated. So could we have further improvements with even more higher ratio of fat to lean mass? That's the question these trials answer. Okay, Dan can focus on that. First question about Oloralin Tide. Good. Paul, next question. The next question will be from Truong Huynh from ubs. Truong, your line is live. Hi guys, thanks for taking my question. Just following on from the previous question on ex US GLP1, you saw Manjaro ex US sales this quarter jumped to 677 million from 286 million. Can you give us some color on how ex US reimbursement is going with the bigger countries? And is this more of an out. And what percentage of the 677 million is obesity sales versus diabetes? Thanks very much. Of pocket drug in these countries? Okay, on that second one, I don't think we'll probably give much of a good answer on that. So I'll maybe ask Ilya to weigh in just on that first question around how EX US reimbursement is going. Sure. Well, of course I think the momentum overall is progressing quite nicely in both the reimbursed as well as the out of pocket segments. We have achieved reimbursement in the uk, we have reimbursement in Germany and we're continuing to look for reimbursement and expand reimbursement in other markets that we've launched. We have some reimbursement in UAE, in Saudi as well in type 2 diabetes, and we continue to expand on that in the markets that we will enter. But a lot of that momentum is covering Both the type 2 and chronic weight management market and both in the reimbursed and out of pocket segment. And we're seeing both the progress in share as well as market expansion in the markets that we've been in. Thanks Ilya. Paul, I know we have a lot in the queue. Maybe we'll just have two more questions and then wrap things up. Certainly the next question is coming from Steve Scala from TD Count. Steve, your line is live. Oh, thank you so much. The FDA definition of shortage seems clear and tirzepatide no longer meeting the definition of shortage seems to imply Lilly is meeting demand. I assume you will say that that's not the case, but the definition, at least in black and white, is quite clear. I assume this is FDA's determination. So does Lilly agree with FDA's conclusion? How is demand being met? How is demand being measured? And what does demand look like? Thank you. Yeah, thanks for the important question. And you know, as we think about the compounding question is important as well. We, as we've said earlier, we're available in all dosage forms in the US what that means is, as you know, we can fill orders as they're received, which is what we're doing. That does not mean that any pharmacy or certainly every Pharmacy has all 12 dosage forms sitting on their shelf. That's infeasible economically, probably for a lot of them and even logistically. So I think we'll continue to see because there's not an abundance of supply, it's more of a real time fulfillment situation. Patients going to pharmacy counters and being told to wait a few days while their orders are filled. But product is flowing and it's flowing at a pretty high rate. You know, we're shipping quite a bit and you can see that in these results from the quarter. So files will add to that picture, but demand will increase as well. So I think we're, we're doing well given the situation. But the end pharmacy experience will continue to be choppy. We point that out to the fda. So that means people may call and say, I couldn't get what I wanted on the moment, I wanted it at the pharmacy. I choose to. That's not the definition that we think applies here. So we'll continue to work with channel partners and the agency to try to clear up the confusion and improve the consumer experience, which is our responsibility along with theirs. Thanks, Paul. Last question. And the last question today will be from Luis Chen from Kanter. Luis, your line is live. Hi, thank you for taking my question. I wanted to ask you how excited you are about these muscle preserving obesity drugs and if you see that as a true unmet need. Thank you. Thanks, Dan. Anything to add on? Yeah, no. Thanks for the question, Lisa. I think it's an interesting area of science for sure. Too soon to know exactly how these kinds of mechanisms will translate into benefits for patients at a high level. We know that the ratio of lean mass to fat mass is really important in determining metabolic health. Probably more important as an indicator of overall metabolic health than for example, bmi. And so that's what spurs these kinds of efforts to increase lean mass while causing fat mass loss. And we'll wait to see data from our own demagremab and wait to see how that translates into health benefits for patients. Great. So I think we'll wrap up. Dave, closing remarks. Great. Thanks Joe. And thanks to the team here. We appreciate your participation in today's earnings call and your interest in Eli Lilly and company. Please follow up with the investor relations team. If you have any questions we didn't address, and it sounds like there's a few that we're holding. Happy to answer all of those. Have a great day, everyone. Thank you. And ladies and gentlemen, this does conclude our conference for today. This conference will be made available for replay beginning at 1pm today, running through September 12th at midnight. You may access the replay system at any time by dialing 800-332-26854 and entering the access code 297-484. International dialers can call 974-.",
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          "text": "So just can you quantify for us.",
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          "text": "Thanks Dave Paul Next Question the next.",
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          "text": "Lovely. Thank you for taking my question. Hopefully you can hear me better this time around.",
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          "text": "Much better.",
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          "text": "Lovely. My question was on margin. So given you are now expecting to land in that mid to high 30s.",
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          "text": "Range this year so soon after Tirzepatide.",
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          "text": "Yeah, sure. Dave, you want to hop in?",
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          "text": "Launches, where can we expect your mid term operating margin to land? Is the margin in the mid-40s perhaps higher achievable? And Dave, I know you've previously suggested.",
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          "text": "Thanks Dave. We'd like to take questions from as many callers as possible and conclude our call in a timely manner so consistent with prior quarters. We'll respond to one question per caller. So I ask that you limit to one question per caller as we'll end the call at 11am if you have more than one question, you can re enter the queue and we'll get to your question if time allows. So Paul, please provide the instructions for the Q and A and we're ready for the first caller.",
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          "text": "Thank you. At this time we'll be conducting a question and answer session. If you have any questions, please press star1 on your phone at this time. We ask that participants limit themselves to one question on today's call. If you do have a follow up question, please rejoin the queue by pressing one at any time. We also ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we pull for questions. And the first question today is coming from Seamus Fernandez from Guggenheim. Seamus, your line is live.",
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          "text": "Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q2 2024 earnings call. @ this time, all participants are on a listen only mode. Later, we will be conducting a question and answer session and instructions will be given at that time. Should you request assistance during the call, please press star then zero and an operator will assist you offline. I would now like to turn the conference over to your host, Joe Fletcher, Senior Vice President of Investor Relations. Please go ahead.",
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          "text": "Thanks Paul and good morning everyone. Thanks for joining us for Eli Lilly and Company's Q2 2024 earnings call. I'm Joe Fletcher, Senior Vice President of Investor Relations and joining me on today's call are Dave Ricks, Lilly's chair and CEO Dr. Dan Skavronski, chief Scientific Officer and President of Lilly Immunology Gordon Brooks, Interim Financial Chief Financial Officer Anne White, President of Lilly Neuroscience Ilya Ufa, President of Lilly International Jake Van Narden, President of Lilly Oncology and Patrick Janssen, President of Lilly Cardiometabolic Health and Lilly usa. And we're also joined by Mikayla Irons, Mike Springnether and Lauren Zuerky of the IR team. During this conference call, we anticipate making projections and forward looking statements based on our current expectations. Our actual results could differ materially due to several factors, including those listed on slide 4. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10K and subsequent filings with the SEC. The information we provide about our products and pipeline is for the benefit of the investment community. It's not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non GAAP financial measures. Now I'll turn the call over to Dave.",
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          "text": "Thanks Joe. It's an exciting time here at Lilly as our growth trajectory accelerated in the second quarter. Our investments in advancing innovative medicines and our focus on manufacturing expansion are bringing Lilly medicines to more people around the world. On slide 5 you can see details of the financial performance in the second quarter and progress related to our strategic deliverables. Revenue grew 36% in Q2 with our new products growing nearly $3.5 billion compared to the same period last year. US demand for Manjaro and Zepbound is strong and growing as access and supply continue to expand. While weekly prescription volume was volatile in the first half of the year due to challenges fulfilling high demand, our progress on supply gives us confidence in our outlook. Q2 saw impressive performance across other areas of the business as well, excluding the sale of the rights to Baxemi. Last year non ANKERTON Growth was 17% worldwide with growth spread across geographies including 25% growth in the United States. And our $3 billion increase in revenue guidance reflects our expectation that momentum will accelerate through the balance of the year. We achieved several key pipeline milestones including the approval of Kisunla, the brand name for Donanemab in the US for the treatment of Alzheimer's disease the approval of Jperka in Japan for people with relapse or refractory mantle cell lymphoma who are resistant or intolerant to other BTK inhibitors, the submission of Tirzepatide in the US and the EU for the treatment of moderate to severe obstructive sleep apnea in adults with obesity and the positive top line results from the summit phase 3 trial evaluating tirzepatide in adults with heart failure with preserved injection fraction and obesity Lilly now has a significant opportunity to create new medicines through a broad internal portfolio in active business development to support our long term growth in obesity. Our strategy is to comprehensively address this global public health crisis, pursuing opportunities against every rational mechanism, indication and dosage form. We are investing broadly in this disease and now have 11 new molecules currently in the clinic across multiple indications. We're also investing in a wide range of late stage phase three programs. We recently shared the positive data of tirzepatidin, OSA and FPAF orforgipron, our oral GLP1 small molecule has a comprehensive phase three program underway in diabetes and obesity with nine trials currently running and readouts starting mid next year with ritatrutile, our GIP GLP1 glucagon triagonist. We have initiated a broad phase three development program studying the molecule in obesity, OSA, osteoarthritis, cardiovascular and renal outcomes as well as type 2 diabetes. These readouts start in 2026. A top priority remains executing on our ambitious manufacturing expansion agenda. In May we announced plans to invest an additional $5.3 billion in our Lebanon, Indiana manufacturing site, bringing our total investment there to $9 billion. We believe this is the largest single investment in synthetic medicine active pharmaceutical ingredient manufacturing in the history of the United States. Importantly, this expansion will enhance capacity to manufacture active pharmaceutical ingredients for Zepbound and Mounjaro. Since 2020, we have committed more than $18 billion to build, upgrade or acquire facilities in the U.S. and Europe and we've begun to see the benefit of these investments. We are making near term progress to ramp production, including at new sites like Research Triangle park, existing Lilly sites, and at contract manufacturing organizations. Our Concord, North Carolina site is progressing well. We're in the process of running validation and expect this facility will initiate production by the end of 2024 with product available to ship in 2025. We also continue to make progress on different presentations for Tirzepatide. We have now launched our multi dose Quick Pen in multiple markets outside the US with positive early indicators of patient adoption and in Gordon's remarks he will preview our plans to launch vials here in the U.S. lastly, in terms of external innovation, in July we announced a definitive agreement to acquire Morphic, a biopharma company developing oral integrin therapies for treatment of serious chronic diseases, including a phase 2 asset being evaluated in inflammatory bowel disease. On slide 6, you'll see a list of key events since our Q1 call, including the milestones I mentioned earlier and several other important updates as we announced in June, Anat Ashkenazi resigned as Lily's Chief Financial Officer to become the CFO of Alphabet. We wish Anat well in her new role and thank her for her partnership and leadership of our financial organization over the last three years. We have named Gordon Brooks Interim CFO as an internal and external search for Anat successor is currently underway. Gordon has been with the company for 29 years and also serves as our Controller and the leader of the Corporate Strategy Group for the company. In other leadership news, Alonzo Wiens, our Executive Vice President of Enterprise Risk Management and our Chief Ethics and Compliance Officer, will retire at the end of the year after 27 years of service. And Melissa Seymour has joined the company as Executive Vice President of Global Quality and a member of the Company's Executive Committee following John and Norton's recent retirement. I want to thank Alonzo for his many years of service and welcome Melissa to the Lilly team. Now let me turn the call over to Gordon to review our Q2 financial results.",
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          "text": "That an operating margin above 40% is.",
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          "text": "Thanks Dave. So I'm on slide 7 which summarizes the financial performance in the second quarter of 2024. Second quarter revenue growth of 36% was primarily driven by Mancharo and Zetbond as well as Visenio when excluding revenue from the sale of rights to Baqsimi. In Q2 of last year, revenue grew 46% gross margin as a percent of revenue increased from 79.8% in Q2 of 23 to 82% in Q2 of 24. Gross margin in the quarter benefited from favorable product mix and higher realized prices partially offset by higher production costs. R and D expenses increased 15% driven by continued investment in our portfolio and in our people. Marketing, selling and administrative expenses increased 10%, primarily driven by promotional efforts associated with ongoing and future launches as well as investment in our people. Operating income increased 90% in Q2 driven by higher revenue from new products, partially offset by operating expense growth. The effective tax rate on a non GAAP basis was 16.5% in Q2 of 24 compared with 16.1% in Q2 of 23. The Q2 24 tax rate reflects a mix of earnings in higher tax jurisdictions, while the Q2 23 rate reflected the impact of earnings from the sale of rights for Baqsimi. At the bottom line, we delivered earnings per share of $3.92 in Q2, an 86% increase compared to the prior year. Q2.24 results include the negative impact of $0.14 from acquired IPR and D charges compared to $0.09 in the prior quarter. Q2 of 23 On Slide 9, we quantify the effects of price rate and volume on revenue growth. US revenue increased 42% in Q2. Volume growth of 27% was driven by Zbond, Manjaro and Visenio, partially offset by the sale of rights for vaccine in Q2 of 23 and decline centralicity. Realized prices increased 15% largely driven by Manjaro Access and Savings card dynamics. As noted in our Q4 Q1 2024 earnings call, unprecedented demand for our ingredient medicines led to wholesaler back orders at the end of Q1. In Q2 we fulfilled the majority of these backorders, improving wholesaler stocking levels. We estimate that us, Majara and zipbound aggregate sales in the second quarter were positively impacted by channel stocking that we estimate totaled high teens to mid-20s as a percent of US sales as we rebuilt inventory from extremely low levels in the spring and to account for the growth of these brands. We're pleased that the improved supply situation is reflected on the FDA shortage website which currently shows all doses of Manjaro and Zepbound listed as available and the two lower doses of Trulicity listed as available. While wholesaler back orders in the US have been reduced substantially, it's important to note that the pharmaceutical supply chain is complex, more so for medicines that require reprituration and offer several different doses. These factors may continue to result in variability in the patient experience at the pharmacy counter. While supply and demand has come into better balance, we expect increases in demand may result in periodic supply tightness for certain presentations and dose levels. We have a continued broad agenda to further increase supply and we'll continue to look at all options. Today we are excited to announce plans to further expand access for Zepbound with the launch of the 2.5 milligram and 5 milligram single dose vials in the coming weeks with more details to come at that time In Europe, revenue grew 20% in constant currency primarily driven by Manjaro launch uptake. In the UK and Germany we also had strong volume growth from Vesenia and Jardiance which was partially offset by decreased volume from Trulicity. Japan performance was strong in the second quarter with 15% revenue growth in constant currency. Volume growth of 21% was driven by uptake of Manjaro and Visenio. Moving to China, Q2 revenue increased 1% in constant currency growth was driven by Tibit Allumiant and Tulce, partially offset by Trulicity and Cialis. Manjaro was recently approved in China for type 2 diabetes and chronic weight management. We have not yet announced expected launch timing in this market. Revenue in rest of the world increased 61% in constant currency primarily driven by Majora volume growth from demand and channel dynamics. Slide 10 provides additional perspective on performance across our product categories. Zenio Solid growth in the second quarter across major geographies with worldwide sales increasing 44% driven by the early breast cancer indication. J Burker revenue increased to $92 million worldwide which included a $19 million partner milestone payment related to Japan. JP Hoca continued impressive quarter over quarter growth building on the brand's uptake from both the MCL and CLL patient populations onboard. Launched in the US and 14 international markets with sales of $26 million in Q2. These launches continue to progress well with increasing patient starts and in the US we expect sales to accelerate as the product specific J code went live on July 1st. Mounjara sales in Q2 were $3.1 billion globally with $2.4 billion in the US. Revenue growth in the US reflected continued strong demand as well as the improved channel dynamics discussed earlier. We're seeing solid uptake of Majaro outside the US with sales in Q2 totaling $677 million in the first half of the year. We launched the Quick Pen presentation in the UK, Germany and the UAE so far in Q3. We have also launched Majara Quickpen in Spain and plan to launch in additional markets throughout 2024. In Q2 worldwide Tralicity revenue declined 31%, US Trulicity revenue decreased 36% driven by lower volume primarily due to competitive dynamics and supply constraints, partially offset by improved wholesaler stocking levels on certain doses. Turning to Slide 11, we have an update on the US launch of Zeb Bound. We've seen exceptional growth trends for Zeb Bound that have accelerated as production has ramped leading to sales of over $1.2 billion in Q2. We are rapidly building out formulary coverage for Zeppelin in the US and as of July 1st had approximately 86% access in the commercial segment. We estimate over 50% of employers have opted in to anti obesity medicine coverage and see that modestly growing as we work to expand coverage. On Slide 12, we provide an update on our capital allocation. Slide 13 shows our updated 2024 financial guidance. We are raising our full year revenue outlook by $3 billion to be between $45.4 billion and $46.6 billion. This increase is due to strong performance across our non increment medicines as well as Manjaro and Zeb Bound. Additionally, we've improved clarity into the timing and face of our production expansion and Mounjaro launches outside the US we achieved a number of supply related milestones in Q2 and have increased confidence regarding our expectation that production of saleable doses of incredent medicines in the second half of 2024 will be at least one and a half times the saleable doses in the second half of 2023. Based on the midpoint of the range, our updated guidance implies revenue growth of 38% in the second half of the year following 31% in the first half. In the second half of the year, we expect a more significant growth in Q4 compared to Q3. Given the update to Revenue guidance, we now expect the ratio of gross margin less OPEX divided by revenue to be in the range of 36 to 38% on a reported basis and 37% to 39% on a non GAAP basis. For other income and expense, we now expect between $525 million and $425 million of expense on a reported basis and between $400 million and $300 million of expense on a non GAAP basis. Both ranges reflect lower expected net interest expense and the reported range reflects net losses on investments in Equity Securities. Through Q2 of 24, we have increased our estimated effective tax rate to be approximately 15% driven by changes in our forecasted mix of earnings in higher tax jurisdictions. Earnings per share is now expected to be in the range of $15.10 to $15.60 on a reported basis and $16.10 to $16.60 on a non GAAP basis. Both ranges reflect the updates mentioned earlier as well as acquired IPR and D charges through Q2 of $0.24. The reported range includes a charge in Q2 of 24 associated with anticipated litigation payments. Now I'll turn the call over to Dan to highlight our progress on R.",
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          "text": "And D. Thanks Gordon. It's been another busy quarter. I'll start with comments on the Kacinla FDA approval, then the Tirzepatide heart failure phase three readout, and finally I'll cover the rest of the updates for the quarter. We are of course very excited about the FDA approval of Kacinla for treatment of Alzheimer's disease. This followed the June advisory Committee meeting where we had another chance to present and discuss the compelling data package characterizing the safety and efficacy of this medicine. We were pleased by the discussion of the FDA advisors, particularly with regard to our data supporting stopping of Kacinla therapy when amyloid plaques are removed to minimal levels. In our trial, nearly half of study participants completed their course of treatment with Kacinla in 12 months. We believe limited duration therapy along with a once monthly infusion schedule could result in lower patient out of pocket treatment costs and fewer infusions required. The vote was unanimously positive on all questions presented and a few weeks later the FDA approved Qacinla, including labeling that physicians may consider stopping dosing of Kusunlot based on reduction of amyloid plaques. Following the July approval, we launched Kasunla and we're delighted to see that patients have already begun receiving this New Lilly medicine as part of clinical practice. We note that Kasunla is broadly covered for Medicare patients through approved CED registries. Regulatory reviews continue around the world with potential action, yet this year in several countries. We're pleased to have recently received a positive opinion for Dinenumab from the Pharmaceuticals and Medical Devices Agency in Japan. And finally, our phase three prevention study, Trailblazer ALS3 continues to progress as planned. Moving to tirzepatide on slide 14 you'll see the recent positive results of our summit phase 3 trial which evaluated tirzepatide for the treatment of heart failure with preserved ejection fraction and obesity. This study demonstrated statistically significant improvements in both primary endpoints for tirzepatide maximum tolerated dose compared to placebo. In the first primary endpoint, tirzepatide reduced the risk of worsening heart failure by 38% compared to placebo as measured by a composited outcome of of heart failure, urgent visit or hospitalization, oral diuretic intensification or cardiovascular death. The median follow up for this endpoint was 104 weeks. In the second primary endpoint, tirzepatide significantly improved heart failure symptoms and physical limitations compared to placebo as measured by the Kansas City Cardiomyopathy Questionnaire KCCQ Clinical Summary Score. Mean changes from baseline in this measurement is 24.8 points or tirzepatide while placebo was 15 points based on the efficacy estimate at 52 weeks. All key secondary endpoints were met in the study, including mean body weight reduction of 15.7% compared to 2.2% for placebo. The overall safety profile of tirzepatide in the Summit trial was consistent with previously reported tirzepatide studies including surmount and surpass. We will present detailed results at an upcoming medical meeting and submit to a peer reviewed journal. We plan to submit results to the FDA and other regulatory agencies starting later this year. In other updates across our portfolio, Slide 15 shows select pipeline opportunities as of August 6th. Slide 16 shows potential key events for the year. I'll start with updates in Cardiometabolic Health, which is the new name of our internal business formerly known as Lilly Diabetes and Obesity. In June, we published detailed results for our phase 3 trials of tirzepatide for the treatment of moderate to severe obstructive sleep apnea and obesity in the New England Journal of Medicine, and we presented results at the American Diabetes association meeting. All primary and key secondary endpoints were achieved in these studies, notably in one of our key secondary endpoints. As shown on slide 17, tirzepatide demonstrated that up to 51.5% of participants met the criteria for disease resolution of sleep apnea. We've now submitted tirzepatite for the treatment of moderate to severe obstructive sleep apnea and obesity to the FDA as well as the ema. We are pleased that the FDA has granted breakthrough therapy designation and we expect US regulatory action as early as the end of 2024, which would be dependent on the FDA granting priority review. Also in June we published results in the New England Journal from our phase 2 trial of tirzepatide for metabolic dysfunction associated steatohepatitis or MASH with stage two or three fibrosis, and we presented these results at the European association for the Study of the Liver. We were pleased to show that in a secondary endpoint, more than half of the patients taking tirzepatide achieved improvement in fibrosis of 52 weeks as shown on slide 18. We engaged with regulatory authorities on a potential phase three registration strategy and were also encouraged by the potential read through of these results to retatruta, which also showed significant improvements in liver fat in Phase two. This quarter we also announced top line data from two phase three trials for our once weekly insulin called efsatorin alpha. The Quint2 and Quint4 trials for the treatment of type 2 diabetes each met their primary endpoints of non inferior A1C reduction. Quint2 compared Upsitora to once daily insulin Degludec for 52 weeks in insulin naive adults. Quin4 compared Epsila to insulin Glargine for 26 weeks in adults previously treated with daily basal insulin and at least two injections per day of mealtime insulin in both Quint 2 and Quint 4 APSLaura was safe and well tolerated. Detailed trial results will be presented in September at the European association for the Study of Diabetes Annual meeting. We look forward to sharing additional data from the QUINT program later this year. We're pleased with our progress to provide breakthrough innovation to patients who require insulin, progressing our glucose sensing insulin receptor agonist molecule in Phase one and investing in approaches aimed at disease modification for type 1 diabetes such as islet cell therapy. In other late phase updates, we've initiated triumph outcomes, a phase 3 trial evaluating cardiovascular outcomes and renal function for patients taking retatrutide. Earlier in our cardiometabolic pipeline, you'll see additional incretin molecules in Phase one. Incretins are an important part of our portfolio strategy and having multiple molecules in clinical development offers us potential optionality as we look at opportunities to help patients across mechanisms, indications, dosages, formulations and treatment schedules. To Highlight A Few Glip1 NPA2 is a small molecule non peptide agonist of the GLP1 receptor designed for once daily oral administration. We expect this asset to move to phase two later this year, so we now identify it on our pipeline slide, whereas it had previously been listed as not disclosed. Given the diversity of indications to potentially pursue with incretins, we are excited about the possibility of having another oral option to help more patients with different diseases. We also highlight today Gipglip1Co Agonist3, which is a next generation dual agonist molecule and we are planning to explore weekly and monthly dosing given its longer half life. Elsewhere in our cardiometabolic health portfolio, we have stopped development of an NRG4 agonist as the profile was insufficient for further clinical development. Turning to oncology, we are pleased that Jperka has now been approved in Japan for people with relapsed or refractory mantle cell lymphoma who are resistant or intolerant to other BTK inhibitors In early phase oncology, we've initiated the phase 1 trial for a second nectin 4 ADC. We view this as an important target and having two compounds in the clinic provides more opportunities to improve outcomes for patients. We've also initiated a phase one trial for our ADC targeting the folate receptor. This asset, which came from our acquisition of mablink, is a next generation construct designed to have efficacy at all folate receptor expression levels and with an improved therapeutic index relative to existing agents. We're also announcing that We've terminated the LOXO783 program which targeted PI3 Kinase Alpha. We evaluated the ongoing clinical data from the program and compared the molecule to next generation candidates that we have progressed from our discovery efforts. We believe our next molecules have greater potential to benefit patients. We look forward to putting our next candidate into the clinic in 2025 and sharing more about its profile later this year. In Immunology, we've now submitted Miracizumab for the treatment of moderately to severely active Crohn's disease. In Japan, we've terminated development for our GITTER antagonist due to insufficient efficacy. We also announced our acquisition of morphic and pending completion of the deal, we plan to reflect the oral alpha 4 beta 7 integrin inhibitor MORF057 in phase 2 for ulcerative colitis and Crohn's disease. Finally, in neuroscience, our anti tau small molecule OGA inhibitor recently concluded its phase two study in early symptomatic Alzheimer's disease. OGA failed to meet the primary endpoint of decreasing the change from baseline as measured by ADRASM in either of the two dose levels tested. We're reviewing the data for presentation of detailed results of the study at the Clinical Trials on Alzheimer's Disease conference later this year. While this negative outcome was disappointing, we remain committed to tau as a high conviction target in Alzheimer's disease and plan to continue studying tau biology and I'll turn the call back to Dave for closing remarks.",
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          "text": "Thanks, Dan. Before we go to Q and A, let me briefly sum up our progress in the second quarter. Exceptional revenue growth in Q2 was driven by Manjaro, Zepbound and Brazenio. We are pleased with the ramp in production in the first half of the year and expect continued expansion ahead. Significant advances in our pipeline include the approval of Kisunla for Alzheimer's disease, the submission of Tirzepatide for moderate to severe obstructive sleep apnea and obesity in the US and Europe, and positive results from the Phase 3 study of tirzepatide for heart failure with preserved injection fraction and obesity. We are investing in product launches, the advancement of our pipeline, as well as our ambitious manufacturing expansion agenda. All of this and the incredible work of our teams around the world give Lilly leadership confidence that we have a very bright future ahead and better opportunity than at any time in our history to impact human health on a global scale. Now I'll turn the call over to Joe to moderate the Q and A session.",
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          "text": "Thanks so much for the question and congrats on all the progress. There seems to be a broader debate on the role emerging earlier stage competition in the obesity market could play where that fits in the market broadly. I'm sure you're not surprised by the breadth of agents being developed in the space, but just interested in your latest views in terms of barriers to entry you see for some of these newer competitors and how you think about defending Lilly's market position over time.",
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          "text": "Oh great. Thanks so much. And just sticking with my one question, it really is on your awareness of ASP movements in the market. So the average selling price, by our calculations, when we sort of look at the ASP averages, removing rebates, inventory, et cetera. Relative to comments made yesterday on Novo's call, I'm just trying to get a better understanding of what you're seeing in.",
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          "text": "The market with regard to average selling price.",
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          "text": "The prices look actually reasonably close to.",
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          "text": "Us with the Tirzepatide franchise having higher.",
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          "text": "You know, sort of ASP per scrip.",
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          "text": "But not dramatically higher, you know, given.",
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          "text": "Concerns of real pricing deterioration. I guess the only question that I have here is what are you seeing from an ASP perspective? And do you see this as kind of the natural evolution of this market as competition emerges as we saw with Ozempic historically and Trulicity in 2019. Thanks so much.",
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          "text": "Where you are in the ramp in rtp? Thank you.",
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          "text": "Yeah, I can just handle. So I think what we're saying today is just reiterating that 1.5 is sort of like a floor on how we think about second half volume. I would say the vials are part of that. But you know, given the we've got 20 weeks left in the year so there's a limit to how much of that will ship anyway. But they certainly open up a node of the most constrained part of the supply chain, which is spill finish and the final container closure. And it uses different lines obviously than syringes or cartridges, so it just adds to our capacity. Probably the most meaningful part of that will show up in early 25 to be honest, as that new form ramps and details on that rollout will be coming in the coming weeks. As it relates to RTP, I wouldn't read through that the Q2 step up in volume we shipped was primarily due to rtp. That site is on track and we are steadily escalating production per our goals. I also mentioned Concord is doing well against its time schedule and we expect product out of that site end of this year, early next year, but rather maybe performance out of the totality of the network. That allowed us to recover wholesaler inventory levels in Q2 and now come off the FDA shortage list. It's more just overall performance across many, many nodes of our supply network.",
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          "text": "Thanks Seamus. I think I'll go to Gordon. Do you want to touch on that or Patrick?",
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          "text": "Sure, I'll cover that. Seamus, thanks for the question. Yeah, so just on price trends, initial favorability in the first half of the year was driven by Majaro. That goes away in the second half of the year as the CO pay program moves out of the base period. In terms of pricing, we see stable pricing sequentially across quarters in 24. So nothing unusual. Q1 to Q2 and our guidance Q3 and Q4 continues stable sequential pricing for the second half of the year. When you don't have the Majaro dynamic pricing, the second half will be similar to prior year pricing. So those are kind of the dynamics we see in pricing.",
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          "text": "Good.",
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          "text": "Paul, next question.",
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          "text": "Paul, the next question will be from Tim Anderson from Wolff Research. Tim, your line is live.",
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          "text": "The next question will be from Terence Flynn from Morgan Stanley. Terrence, your line is live.",
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          "start_time": "00:31:44,230",
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          "text": "Great.",
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          "text": "Thanks for taking the question.",
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          "text": "Congrats on all the progress on the manufacturing. Maybe just a two part for me on that one.",
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          "text": "Just wondering if your initial guidance for.",
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          "start_time": "00:31:52,790",
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          "text": "The at least 1.5-fold increase in sellable doses include the Zepbound starter vials that you're rolling out in the US or if that's a potential driver of upside. And then as we think about rtp, I know you're continuing to make progress there. The script suggests you're at about a third of the way through the ramp to peak, but this inventory restock that you talked about today suggests maybe more of a meaningful step up.",
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          "text": "Question will be from Chris Schott from JPMorgan. Chris, your line is live.",
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          "text": "Great.",
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          "text": "Thank you.",
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          "text": "Maybe Dan, do you want to start on that and then yeah, I'll start.",
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          "text": "With some R and D comments on bearish entry. The first, I think is having a successful drug in phase 3 clinical trials and getting it approved. You can see that we've invested thoroughly, say in our Phase three portfolios, often pursuing multiple indications in multiple populations at once, just being able to get to that point. I know investors have gotten excited about various releases of Phase one data, but it's still a challenging space to develop drugs and we usually wait until we've seen pretty robust Phase two data before we get too excited about a particular molecule. So that's the first thing. And I think a lot of the news that we've seen from different companies will probably sort out as we get to seek Phase two data and which molecules make it and which have the right profile and which don't. But I wouldn't be expecting 100% success here.",
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          "text": "Maybe a few additional comments. I think when we look at the marketplace there are two very important barriers. We have been extremely successful in gaining access across both Monjaro, where we have currently 93% access in commercial and 89 in Part D and similarly for seppbound 86% after seven months in the marketplace, that's quite significant. The second piece is the amount of outcome indications. We are investing heavily in both Mounjaro and Sebbound and similarly for the Phase 3 assets of Oglepron and retathretide. So I think overall we think that we are extremely well positioned to compete here and we are not surprised to see that most of the firms are actually leaning into this very important space. But with the cost we have in our hands in the market today, the phase three assets and what we refer to in the prepared remarks, we are well positioned to compete today and tomorrow. That goes across both different indications. Assets, dental therapy, et cetera. All hands on deck on our side.",
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          "start_time": "00:36:30,254",
          "end_time": "00:37:46,360",
          "text": "Maybe one last thing to pile on, but here we're highlighting our pipeline data. 11 assets, all different targets. Maybe just a reminder, Chris, we had our phase one mad data for tirzepatide in 2016. That was eight years ago. And that's a massive lead, I think over other GIP GLP agonists that are behind us. On the oral side, you can get more in category differentiation based on target engagement, safety profiles, et cetera. But here again we have the most advanced program and as Dan highlighted today, a follow on program to add to that sort of portfolio we have there. Finally, one other, I don't know if it's a barrier, but certainly it's work to do is scaling manufacturing. The volume is really high in this category. Probably wind up being one of the highest volume categories in the history of the industry. And you're talking about making things on the billion scale, which takes time and is technically difficult and very capital intensive. So of course competitors will come. But there's a road ahead for all these that the two leading companies have already walked in large part.",
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          "text": "Thank you all. Next question.",
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          "text": "Thank you. I have a question on compounders of GLP1s, including, you know, but not limited to your Tirzepatide. So companies like hims or anyone else, how can this not infringe patent protection? And is this something that is likely to get adjudicated in the courts, meaning that you and presumably Novo sue. An article, you know, just yesterday in the New York Times talked about patients getting upside down with compounded GLP1s. I think they used the term overdosing on these compounded formulations. So, you know, not only do compounders take away sales from you guys, but it could also tarnish the reputation of the class. So what can we expect Lilly to do about it?",
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          "text": "Thanks, Tim. Daniel, want to start with some comments?",
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          "text": "Yeah. Thanks for raising this important topic, Tim. Of course we've been watching this carefully. Not, you know, really out of concern that they're Taking away our business. As you know, we've been largely supply constrained here, but rather the impact it's having on patient health. We often are able to secure samples from these kinds of compounding labs and analyze them in our own labs. And what we find for the most part, in most instances is this isn't compounded tirzepatite at all. Our drug is not available to compounders. Rather they're purchasing either other chemicals entirely, which we often find, or fake producers of tirzepatide that is often full of impurities, sometimes contaminated by bacteria. This is a safety risk to patients that we take seriously and trying to do everything we can to make patients aware of the potential dangers here so that we can help them.",
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          "text": "Yeah, and just from a policy standpoint, I mean, you can expect us to be active here. We've taken public positions, we're obviously engaged with regulators and considering all kinds of legal actions and filed some. Of course, you know, compounding is a long standing practice under the 503 provisions of FDA, which is meant to customize doses for individual patient needs that we don't. It's not clear to me medically what that would be for tirzepatide, but I guess that's legal in a sense. It's the mass production that's concerning and we don't see a lot of that with our medicine, more with the other one. But I think if we just step back and reflect on why this is happening. There's shortages because of parental manufacturing constraints in the industry and in the leading companies. A lot of that constraint is investing and proving those processes are compliant with the GMP standards that the FDA and Europe under Annex 1 have enforced. And we agree by the way, with that, strict enforcement. So it's a little odd that the answer to that constraint, which is about raising the standards of the industry to have sterile product, is to create another industry that has non sterile product. So we're just pointing that out and I think you can see Lilly on the front foot here over the coming months to address this. But ultimately the real thing to address is increasing coverage on insurance and increasing supply. We've made a lot of strides in supply. We'll step that up another notch with the availability of vials. And we need to work with primarily the government as well as employers to expand coverage so obesity medicines are affordable. I think when we get to those points, this will be a non issue. But in the meantime, people can get hurt. And as Dan said, it's pretty concerning what's happening.",
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          "start_time": "00:41:42,070",
          "end_time": "00:41:43,690",
          "text": "Thanks, Paul. Next Question.",
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          "text": "Next question will be from Umair Rafat from Evercore. Umar, your line is live.",
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          "start_time": "00:41:50,100",
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          "text": "Hi guys, thanks for taking my question.",
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          "start_time": "00:44:15,300",
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          "text": "My question is regarding the rest of.",
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          "start_time": "00:44:18,292",
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          "text": "The world sales for Incretins. It seems like Munjaro is doing quite well there and if I take out.",
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          "start_time": "00:52:59,690",
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          "text": "Chris, your line is live.",
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          "text": "I want to ask on operating leverage, if I may. I know in first quarter when you guys raised the guidance by 2 billion on top line, it dropped down to EPS by $1.3. This quarter guidance went up by 3 billion, but it dropped down at a much higher leverage at 216 EPS, almost a 90% incremental margin. And my question is not so much what your operating leverage is going to be in 2025 or a four year guidance, but instead I'm basically asking if you annualize the momentum of your four Q numbers. Per this year's guidance, the EPS upside implied to consensus could be almost as much as half of Lilly's entire full year EPS where it stands right now. So I'm just trying to think through how do you plan on spending on various functions and what the incremental margins could look like as the revenue momentum really kicks in with the improving supply. Thank you.",
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          "text": "Thanks Umer. There's a lot of financial mechanics there I'll hand to Gordon to comment on. I think effectively capital allocation considerations.",
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          "text": "Good, thanks Umar. I appreciate the question. Yeah, I mean we've been speaking for a long time about operating margins and getting to the mid to high 30% range. As we've seen this year, Majora and Tip Bound are taking an inflection point upwards and so we're seeing ourselves at the top end of that range for the first half. Margins are a little inflated. We haven't yet lent into all of our promotional channels and Incretons. You don't see for instance TV commercials on the incretins. We haven't done that. Looking at the. Given the supply situation and in R and D it takes time to scale R and D thoughtfully so it doesn't always move exactly in sync quarter by quarter with revenue. That said, our guidance for the year does indicate we will stay in the upper 30% range for the full year with growth first half. If you look at the first half as the two quarters growth into the second half and you should also expect to see within that mix strong, stronger sales and marketing growth as we get to new launches in the second part of the year. And R and D continue to scale and grow from what we've seen thus far. So those are the dynamics we see on operating margin for 2024.",
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          "start_time": "00:44:03,890",
          "end_time": "00:44:05,852",
          "text": "Thanks Gordon. Paul, next question.",
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          "text": "The next question will be from Mohit Pansal from Wells Fargo. Mohit, your line is live.",
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          "text": "Great, thank you Very much for taking my question and congrats on the quarter.",
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          "start_time": "00:57:26,216",
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          "text": "Not sustainable for an innovation focused company, but given your progress so far, I wonder if you've changed your view on that. Thank you.",
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          "start_time": "00:44:24,820",
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          "text": "The 15% or so for stocking in.",
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          "text": "The U.S. it seems like ex US is already about 33% this early in the launch. So I would love to understand how has been your experience so far and is there going to be any different uptake for EX US versus your prior generation Incretins for both Mounjaro and Zeb Bound given that these are really efficacious drugs.",
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          "text": "Yeah, thanks Mohit for the question. Ilya, do you want to comment on OUS rollout for Manjaro?",
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          "text": "Thanks Mohit for the question. You know we've seen some great progress with the launch of Manjaro outside of the us. I think what you've seen in terms of growth in the earlier launch countries such as the UK UAE and Saudi. UAE and Saudi are both key markets that make up rest of world, however achieved a leading share and continue to drive momentum and overall market growth. And so as you take a look at Q2 the main driver of that growth has been in Mountjaro in markets where we've already launched earlier in the cycle and majority of that coming from the Quickpen presentation with a lot of that in the uae. Some of that is channel dynamics similar to the us. At the same time if you take a look at Q2 and the trajectory for Q2 relative to historical peak sales of any of our brands, it's already surpassed that with limited number of markets where we've launched. And so as we look at the coming quarters, obviously we just recently launched in Germany and now also Spain with a quick pen presentation we'll also look at monitor the demand and also supply capacity and expect to launch in newer markets. The near term growth I would expect predominantly coming from already launched markets of Nanjaro.",
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          "start_time": "00:46:26,970",
          "end_time": "00:46:30,194",
          "text": "Thanks Ilya. Paul, Next question the next question will.",
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          "text": "Be from Alex Hammond from Bank of America. Alex, your line is live.",
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          "start_time": "00:46:34,970",
          "end_time": "00:46:36,562",
          "text": "Thanks for taking the question.",
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          "start_time": "00:46:36,746",
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          "text": "In the prepared remarks Dan mentioned engagement with regulatory authorities on a potential pivotal trial and mashed. Can you provide any color on these.",
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          "text": "Gordon, you want to touch on that briefly?",
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          "text": "Discussions and how Lilly is thinking about trazeptide versus Tortatrutide for this indication?",
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          "start_time": "00:46:49,726",
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          "text": "When could we receive updates?",
          "created_at": "2025-01-08T18:41:10.59119Z",
          "updated_at": "2025-01-08T18:41:10.59119Z"
        },
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          "start_time": "00:46:51,582",
          "end_time": "00:46:54,094",
          "text": "Thank you Dan.",
          "created_at": "2025-01-08T18:41:10.908172Z",
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        },
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          "segment_id": 125,
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          "start_time": "00:57:40,148",
          "end_time": "00:57:40,580",
          "text": "We'll do.",
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        },
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          "segment_id": 67,
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          "start_time": "00:46:54,222",
          "end_time": "00:48:21,600",
          "text": "Yeah, thanks for the question. We're really excited about the opportunity to help patients suffering from mash. I think the data that we shared in phase two purchase appetite is really quite profound in terms of the size of effect we can have. There's a couple issues in mass drug development that we're trying to tackle, probably the most significant of which is the current standard of liver biopsy to identify the patients to enroll in these trials and also to measure the outcome. Liver biopsy is obviously an invasive procedure and difficult to find patients to consent to these trials. And of course, there's risk to patients. We're working hard to develop non invasive biomarkers that can be used to identify the right patients to enroll in match studies and also potentially could be used as an outcome to know if a drug's working. My hope is that we could develop those kinds of biomarkers that could be used for both purposes and could be suitable for accelerated approval of match drugs in the future. Of course, long term, traditional approval for match drugs still requires demonstration of outcomes. So in that environment, we have two drugs that I think could both be great mash drugs. And we'll have to decide whether to invest in one or both of those drugs, depending on the regulatory paths we see. We'll keep investors updated as we make decisions about making sure these molecules are mesh.",
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          "segment_id": 68,
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          "start_time": "00:48:22,100",
          "end_time": "00:48:23,720",
          "text": "Thanks, Paul. Next question.",
          "created_at": "2025-01-08T18:41:11.345377Z",
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        },
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          "segment_id": 69,
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          "start_time": "00:48:24,180",
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          "text": "The next question will be from Evan Segerman from BMO Capital Markets. Evan, your line is live.",
          "created_at": "2025-01-08T18:41:11.595107Z",
          "updated_at": "2025-01-08T18:41:11.595107Z"
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          "start_time": "00:58:31,300",
          "end_time": "00:58:50,012",
          "text": "Hey, thanks so much. So we're starting to see that myostatins may not be the only way to kind of preserve lean muscle mass. In particular, it looks like amlin gift glip combos are showing the potential for maybe 90 versus 10% fat versus muscle loss. Can you talk about what you think a laurelin tight to zephyrtide combo could.",
          "created_at": "2025-01-08T18:41:18.938705Z",
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          "segment_id": 131,
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          "speaker": "",
          "start_time": "00:58:50,036",
          "end_time": "00:58:53,806",
          "text": "Show, both in terms of absolute weight loss, but also the quality of that weight loss?",
          "created_at": "2025-01-08T18:41:18.991078Z",
          "updated_at": "2025-01-08T18:41:18.991078Z"
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          "segment_id": 70,
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          "speaker": "",
          "start_time": "00:48:29,580",
          "end_time": "00:48:30,164",
          "text": "Hi, guys.",
          "created_at": "2025-01-08T18:41:11.779461Z",
          "updated_at": "2025-01-08T18:41:11.779461Z"
        },
        {
          "segment_id": 71,
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          "speaker": "",
          "start_time": "00:48:30,212",
          "end_time": "00:48:31,876",
          "text": "Thank you so much for taking my question.",
          "created_at": "2025-01-08T18:41:11.934263Z",
          "updated_at": "2025-01-08T18:41:11.934263Z"
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          "segment_id": 72,
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          "speaker": "",
          "start_time": "00:48:31,948",
          "end_time": "00:48:34,260",
          "text": "I wanted to touch on manufacturing and.",
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          "segment_id": 133,
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          "start_time": "00:58:59,630",
          "end_time": "00:59:00,570",
          "text": "Thank you.",
          "created_at": "2025-01-08T18:41:19.045712Z",
          "updated_at": "2025-01-08T18:41:19.045713Z"
        },
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          "segment_id": 74,
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          "speaker": "",
          "start_time": "00:48:37,652",
          "end_time": "00:48:40,596",
          "text": "Back in February around the proposed acquisition.",
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        },
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          "segment_id": 73,
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          "start_time": "00:48:34,300",
          "end_time": "00:48:37,604",
          "text": "Specifically on the concern that you raised.",
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          "updated_at": "2025-01-08T18:41:12.784953Z"
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          "segment_id": 75,
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          "start_time": "00:48:40,628",
          "end_time": "00:48:52,640",
          "text": "Of Catalan by Novo holdings and the subsequent sale to Novo Nordisk. Are you still as concerned as you were in February or given what you've been able to do with your own footprint, is this less of an issue? Thank you so much.",
          "created_at": "2025-01-08T18:41:13.052758Z",
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          "segment_id": 97,
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          "start_time": "00:52:41,040",
          "end_time": "00:52:48,460",
          "text": "Just going back to the margin question earlier, given you're now expecting your 2024 rating.",
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          "updated_at": "2025-01-08T18:41:16.956326Z"
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          "segment_id": 98,
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          "speaker": "",
          "start_time": "00:52:49,360",
          "end_time": "00:52:58,434",
          "text": "Apologies team. We will get Kerry reconnected with the better line momentarily. We'll move on to the next question. In the meantime if that's okay. From Chris Shabutani from Goldman Sachs.",
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          "speaker": "",
          "start_time": "00:52:58,482",
          "end_time": "00:52:59,270",
          "text": "Thanks, Paul.",
          "created_at": "2025-01-08T18:41:17.096855Z",
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        },
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          "segment_id": 76,
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          "speaker": "",
          "start_time": "00:48:55,270",
          "end_time": "00:50:18,980",
          "text": "Yeah, I can take it. You know, we remain concerned about that transaction. I don't think it was ever really about the trajectory of our ramp. Although, as we've disclosed, we do rely on one of the catalan sites for GLP1 and other diabetes production. It's more the oddity of your main competitor being also your contract manufacturer and how to resolve that situation. There's also an industry structure issue. You know, CDMOs are important for managing capacity across the sector and if we ended up in an outcome where that sector didn't really exist, they became captive of large pharma would really constrain, I think, availability and the development of medicines, particularly out of biotechs. So we've, you know, aired those concerns publicly and privately since the proposed transaction was announced and we're waiting to see what happens. But in terms of the long term outlook for our company, as you may have Noticed we're building aggressively ourselves. Our primary strategy is self run sites and we've got 18 billion we've announced in the last several years. Probably not done there. And we're quite comfortable building operating sites. And as the newest large sites have begun to come online, we know we can execute that drill and repeat it. That's our base plan.",
          "created_at": "2025-01-08T18:41:13.386349Z",
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          "segment_id": 77,
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          "start_time": "00:50:19,600",
          "end_time": "00:50:21,416",
          "text": "Thanks Evan for the question. Paul.",
          "created_at": "2025-01-08T18:41:13.616193Z",
          "updated_at": "2025-01-08T18:41:13.616193Z"
        },
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          "segment_id": 78,
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          "start_time": "00:50:21,528",
          "end_time": "00:50:26,820",
          "text": "Next the next question will be from Dave Risinger from Learinc. Dave, your line is live.",
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          "updated_at": "2025-01-08T18:41:13.832652Z"
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          "segment_id": 79,
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          "speaker": "",
          "start_time": "00:50:29,200",
          "end_time": "00:50:33,112",
          "text": "Yes, thanks so much. Let me add my congrats on the.",
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          "updated_at": "2025-01-08T18:41:14.091566Z"
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          "segment_id": 80,
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          "speaker": "",
          "start_time": "00:50:33,136",
          "end_time": "00:50:35,256",
          "text": "Results as well and the corporate updates.",
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          "updated_at": "2025-01-08T18:41:14.259379Z"
        },
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          "segment_id": 81,
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          "speaker": "",
          "start_time": "00:50:35,368",
          "end_time": "00:50:38,904",
          "text": "So Zepbound's breadth of health and worker.",
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          "updated_at": "2025-01-08T18:41:14.500074Z"
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          "segment_id": 82,
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          "start_time": "00:50:38,952",
          "end_time": "00:50:42,892",
          "text": "Productivity benefits seem to be underappreciated by many.",
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          "speaker": "",
          "start_time": "00:50:43,056",
          "end_time": "00:50:45,060",
          "text": "You know, there are articles from time.",
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          "start_time": "00:50:45,100",
          "end_time": "00:50:51,000",
          "text": "To time that say that, you know, patients need an off ramp from therapy, etc.",
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          "updated_at": "2025-01-08T18:41:15.114019Z"
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          "start_time": "00:50:51,420",
          "end_time": "00:50:54,404",
          "text": "And my question is what is Lilly.",
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          "segment_id": 86,
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          "speaker": "",
          "start_time": "00:50:54,452",
          "end_time": "00:50:58,980",
          "text": "Doing to encourage patients to stay persistent with therapy?",
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          "updated_at": "2025-01-08T18:41:15.507642Z"
        },
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          "segment_id": 87,
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          "start_time": "00:50:59,140",
          "end_time": "00:51:01,108",
          "text": "And how does Lilly intend to better.",
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          "updated_at": "2025-01-08T18:41:15.672898Z"
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          "segment_id": 101,
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          "start_time": "00:53:00,938",
          "end_time": "00:53:02,110",
          "text": "Yes, thank you.",
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        },
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          "start_time": "00:53:02,570",
          "end_time": "00:53:05,890",
          "text": "With all the different oral mechanisms, in.",
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          "segment_id": 132,
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          "start_time": "00:58:53,878",
          "end_time": "00:58:59,550",
          "text": "And then where would myostatins fit in a world where next gen amyloid triplets could show that level of muscle preservation?",
          "created_at": "2025-01-08T18:41:19.063424Z",
          "updated_at": "2025-01-08T18:41:19.063424Z"
        },
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          "segment_id": 88,
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          "speaker": "",
          "start_time": "00:51:01,164",
          "end_time": "00:51:15,956",
          "text": "Communicate not just zepbound's health benefits but its worker productivity benefits to employers in order to drive much greater employer inclusion of obesity drugs as part of employee benefits?",
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          "updated_at": "2025-01-08T18:41:15.843521Z"
        },
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          "segment_id": 89,
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          "start_time": "00:51:16,148",
          "end_time": "00:51:19,380",
          "text": "Thanks very much. Thanks Dave.",
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          "start_time": "00:51:19,460",
          "end_time": "00:51:22,756",
          "text": "Patrick, do you want to comment on persistency and benefits?",
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          "start_time": "00:51:22,948",
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          "text": "Absolutely. You know I think first of all when we look at persistency it's very early after the launch, but based upon the feedback we hear from providers and from patients as well, this is a drug that patients want to stay on because they experience the benefits firsthand of weight loss and also the downstream implications on comorbidities. You are right, the employer opt in efforts are extremely key and we believe that our outcome data OSA now HEFPEV will help us tremendously and more readout to come over the coming years. We're also having value based agreement with several other payers where we are looking into the benefits of the TFC appetite in the workplace in terms of reduced absentees, increased productivity etc.",
          "created_at": "2025-01-08T18:41:16.289997Z",
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          "start_time": "00:52:06,750",
          "end_time": "00:52:07,150",
          "text": "As well.",
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          "updated_at": "2025-01-08T18:41:16.440462Z"
        },
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          "start_time": "00:52:07,190",
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          "text": "And that has gained a lot of interest in terms of the consumer. Yes, the easy start and stay on is a key priority for us and that we're working with consumers, improving our consumer platforms and also digital channels to really enable patients to experience the benefits that Setbound provides over time.",
          "created_at": "2025-01-08T18:41:16.575392Z",
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          "start_time": "00:52:29,600",
          "end_time": "00:52:31,620",
          "text": "Thanks Patrick. Paul, next question.",
          "created_at": "2025-01-08T18:41:16.667788Z",
          "updated_at": "2025-01-08T18:41:16.667788Z"
        },
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          "start_time": "00:52:32,000",
          "end_time": "00:52:36,260",
          "text": "The next question will be from Kerry Hallford from Berenberg. Kerry, your line is live.",
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          "updated_at": "2025-01-08T18:41:16.762734Z"
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          "segment_id": 96,
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          "speaker": "",
          "start_time": "00:52:38,400",
          "end_time": "00:52:40,180",
          "text": "Thank you for taking my question.",
          "created_at": "2025-01-08T18:41:16.871458Z",
          "updated_at": "2025-01-08T18:41:16.871458Z"
        },
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          "segment_id": 126,
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          "speaker": "",
          "start_time": "00:57:40,620",
          "end_time": "00:57:41,316",
          "text": "Thanks Kerry.",
          "created_at": "2025-01-08T18:41:18.742222Z",
          "updated_at": "2025-01-08T18:41:18.742222Z"
        },
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          "segment_id": 127,
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          "start_time": "00:57:41,348",
          "end_time": "00:58:22,890",
          "text": "Appreciate the question. Yeah, I think, you know, as we said in our guidance, as I said earlier, we do expect to end in that upper 30s range this year. There's still a lot at play here. Yes, on the top line we see inflection points on revenue, but through the first half you've had an inflated position. We haven't yet leaned into any of our promotional channels that that's going to be a dynamic that we lean into more starting in the second half. And R and D, we do intend to scale that and that that's not going quarter by quarter exactly in line with with revenue. So all of those things are still going to play through. You know, I think that said, at this point we're just talking about 2024 and when we do guidance for 25, we'll chat about the longer term picture then.",
          "created_at": "2025-01-08T18:41:18.779165Z",
          "updated_at": "2025-01-08T18:41:18.779165Z"
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          "segment_id": 128,
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          "start_time": "00:58:23,860",
          "end_time": "00:58:24,332",
          "text": "Thanks.",
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          "text": "Next question, Paul, the next question will be from Akash Tiwari, from Jeffries. Akash, your line is live.",
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          "text": "Particular variations on it from yourselves as.",
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          "text": "Well as competitors, can you update us on your thinking on what the basis of competition is going to be and.",
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          "text": "What kind of opportunities do you really envision?",
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          "text": "I think there has been for a.",
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          "text": "While now a comparison on the basis of percent weight gain loss, particularly for the injectables. But as we move into orals, it seems as if tolerability profiles really matter. So how are you thinking about it and how do you recommend investors think.",
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          "text": "When we compare data sets across these other oral products in development, Even if.",
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          "text": "The mechanisms are different, how do we.",
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          "start_time": "00:53:41,050",
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          "text": "Get smarter about differentiating and interpreting data? Thank you.",
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          "start_time": "00:53:46,090",
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          "text": "Anyone chime in?",
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          "text": "Yeah, thanks Chris. I'll start and we'll see Patrick presenting that on commercial differentiation. But in the clinical trials, first of all, as I was saying before, just take some caution on these small, short phase one trials. There's more to see. Most of the drugs that we've seen actually aren't different mechanisms, they're GLP1 agonists. In this class, I don't expect there to be differentiation in terms of efficacy. Weight loss, you can pretty much dial in the amount of weight loss you want depending on how aggressively you dose it and what population. Tolerability is another issue that usually comes along with the efficacy. The faster you ramp to higher doses, the less tolerability you have. And the different companies will have to work through their own escalation of dosing to match the desired efficacy with some reasonable tolerability. The variable that links those two things together is often the half life of the molecule. So shorter half life molecules will give you bigger peak trough excursions in the pharmacokinetics of the drug. And we think that's what that drives the tolerability issues. So what you want is a long half life molecule that can be dose escalated more smoothly. So that probably will be the differentiation rather than anything that the companies are currently talking about in terms of efficacy. As I said before, it's a long road from early data to phase 3 clinical trials like we have with Orphoglipron and we can expect some attrition. I'm pretty excited also about next generation molecules. All these ones that we've been talking about now are GLP1s and offer efficacy sort of in the range of injectable semaglutide. I think ultimately we'd like to see drugs that offer efficacy and tolerability that exceeds that. Things that could combine multiple incretins like Tirzepatide does. And we are certainly working on orals that could also agonize GIP1, for example. So exciting progress there and more to come on that in the future from.",
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          "text": "Us, just from a commercial point of view. We are regularly conducting both consumer and provider market research. And when we look into the preferences, the true drivers today is still the degree of weight loss and safety and tolerability. When we look at the needs beyond that, it's actually the need of an oral and an oral with an injectable like efficacy. So that's probably the need that comes beyond what we're currently serving today and particularly to serve those patients that have fear of injections. When we look at other aspects, I think what comes beyond that would be the composition of weight loss, lean mass versus fat and durability. And I think we're looking into all.",
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          "text": "Of those aspects as well.",
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          "text": "Thank you and thanks for the answers. Paul, next question. I know we're running short on time, so we'll do our best to kind of compress our answers as we get through as many questions as possible.",
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          "text": "Paul, thank you. And we have Kerry Holford from Berenberg reconnected. Kerry, your line is live.",
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          "text": "Thanks. We have multiple mechanisms in play here, starting maybe with the amylin. We have a molecule, phase two, called alurolentide, which is a pure amylin agonist. And we're evaluating that both as monotherapy and as in combination with tirzepatide kipglip. So that'll be interesting to see. I don't have strong preconceived notions about what to expect in terms of lean versus fat mass loss with that particular combination. Probably the people who have the most data about that would be the scientists at Novo, since they've investigated criglutide in combination with semaglutide. I think that brings us probably to another mechanism which is dual amylin calcitonin agonism, which cragrelatide probably is a dual agonist. And we have a molecule like that in phase one called Dacra, and we'll also investigate that. And composition of biomass will be one of the aspects in which we evaluate it. And then finally you talk of myostatin. We have a molecule in this family and that's the bimagramab that we acquired from Vernon Stanis, which is an antibody against the receptor. And that's proceeding in a phase two trial in combination with semaglutide. And we look forward to having data to share with that in the future. All of these mechanisms I think could have variable effects on body mass composition. But I point out that so far we've not seen any disadvantages to the types of weight loss that we get with tirzepatide in Fact, patients show improved functional outcomes on a variety of things, including function in heart failure as we just demonstrated. So could we have further improvements with even more higher ratio of fat to lean mass? That's the question these trials answer.",
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          "text": "Okay, Dan can focus on that. First question about Oloralin Tide.",
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          "text": "Good. Paul, next question.",
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          "text": "The next question will be from Truong Huynh from ubs. Truong, your line is live. Hi guys, thanks for taking my question. Just following on from the previous question on ex US GLP1, you saw Manjaro ex US sales this quarter jumped to 677 million from 286 million. Can you give us some color on how ex US reimbursement is going with the bigger countries? And is this more of an out.",
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          "start_time": "01:01:25,596",
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          "text": "And what percentage of the 677 million is obesity sales versus diabetes? Thanks very much.",
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          "start_time": "01:01:23,500",
          "end_time": "01:01:25,412",
          "text": "Of pocket drug in these countries?",
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          "start_time": "01:01:33,910",
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          "text": "Okay, on that second one, I don't think we'll probably give much of a good answer on that. So I'll maybe ask Ilya to weigh in just on that first question around how EX US reimbursement is going.",
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          "start_time": "01:01:46,550",
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          "text": "Sure. Well, of course I think the momentum overall is progressing quite nicely in both the reimbursed as well as the out of pocket segments. We have achieved reimbursement in the uk, we have reimbursement in Germany and we're continuing to look for reimbursement and expand reimbursement in other markets that we've launched. We have some reimbursement in UAE, in Saudi as well in type 2 diabetes, and we continue to expand on that in the markets that we will enter. But a lot of that momentum is covering Both the type 2 and chronic weight management market and both in the reimbursed and out of pocket segment. And we're seeing both the progress in share as well as market expansion in the markets that we've been in.",
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          "start_time": "01:02:38,420",
          "end_time": "01:02:39,516",
          "text": "Thanks Ilya.",
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          "start_time": "01:02:39,628",
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          "text": "Paul, I know we have a lot in the queue. Maybe we'll just have two more questions and then wrap things up.",
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          "start_time": "01:02:43,940",
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          "text": "Certainly the next question is coming from Steve Scala from TD Count. Steve, your line is live.",
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          "start_time": "01:02:49,620",
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          "text": "Oh, thank you so much. The FDA definition of shortage seems clear and tirzepatide no longer meeting the definition of shortage seems to imply Lilly is meeting demand. I assume you will say that that's not the case, but the definition, at least in black and white, is quite clear. I assume this is FDA's determination. So does Lilly agree with FDA's conclusion? How is demand being met? How is demand being measured? And what does demand look like?",
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          "start_time": "01:03:22,294",
          "end_time": "01:03:23,100",
          "text": "Thank you.",
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          "start_time": "01:03:24,680",
          "end_time": "01:04:53,070",
          "text": "Yeah, thanks for the important question. And you know, as we think about the compounding question is important as well. We, as we've said earlier, we're available in all dosage forms in the US what that means is, as you know, we can fill orders as they're received, which is what we're doing. That does not mean that any pharmacy or certainly every Pharmacy has all 12 dosage forms sitting on their shelf. That's infeasible economically, probably for a lot of them and even logistically. So I think we'll continue to see because there's not an abundance of supply, it's more of a real time fulfillment situation. Patients going to pharmacy counters and being told to wait a few days while their orders are filled. But product is flowing and it's flowing at a pretty high rate. You know, we're shipping quite a bit and you can see that in these results from the quarter. So files will add to that picture, but demand will increase as well. So I think we're, we're doing well given the situation. But the end pharmacy experience will continue to be choppy. We point that out to the fda. So that means people may call and say, I couldn't get what I wanted on the moment, I wanted it at the pharmacy. I choose to. That's not the definition that we think applies here. So we'll continue to work with channel partners and the agency to try to clear up the confusion and improve the consumer experience, which is our responsibility along with theirs.",
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          "start_time": "01:04:53,730",
          "end_time": "01:04:56,070",
          "text": "Thanks, Paul. Last question.",
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          "start_time": "01:04:56,530",
          "end_time": "01:05:01,990",
          "text": "And the last question today will be from Luis Chen from Kanter. Luis, your line is live.",
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          "text": "Hi, thank you for taking my question. I wanted to ask you how excited you are about these muscle preserving obesity drugs and if you see that as a true unmet need. Thank you.",
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          "start_time": "01:05:13,600",
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          "text": "Thanks, Dan. Anything to add on?",
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          "text": "Yeah, no. Thanks for the question, Lisa. I think it's an interesting area of science for sure. Too soon to know exactly how these kinds of mechanisms will translate into benefits for patients at a high level. We know that the ratio of lean mass to fat mass is really important in determining metabolic health. Probably more important as an indicator of overall metabolic health than for example, bmi. And so that's what spurs these kinds of efforts to increase lean mass while causing fat mass loss. And we'll wait to see data from our own demagremab and wait to see how that translates into health benefits for patients.",
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          "start_time": "01:05:52,710",
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          "text": "Great. So I think we'll wrap up. Dave, closing remarks.",
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          "start_time": "01:05:56,382",
          "end_time": "01:06:13,440",
          "text": "Great. Thanks Joe. And thanks to the team here. We appreciate your participation in today's earnings call and your interest in Eli Lilly and company. Please follow up with the investor relations team. If you have any questions we didn't address, and it sounds like there's a few that we're holding. Happy to answer all of those. Have a great day, everyone.",
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          "text": "Thank you. And ladies and gentlemen, this does conclude our conference for today. This conference will be made available for replay beginning at 1pm today, running through September 12th at midnight. You may access the replay system at any time by dialing 800-332-26854 and entering the access code 297-484. International dialers can call 974-.",
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    "end_time": "2025-01-08T18:41:16Z",
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      "call_id": "Microsoft Q1 25",
      "text": " Greetings and welcome to the Microsoft Fiscal Year 2025 First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Iverson, Vice President of Investor Relations. Please go ahead. Good afternoon and thank you for joining us today. On the call with me are Satya Nadella, Chairman and Chief Executive Officer Amy Hood, Chief Financial Officer Alice Jala, Chief Accounting Officer and Keith Dolliver, Corporate Secretary and Deputy General Counsel. On the Microsoft Investor Relations website you can find our earnings press release and Financial Summary Slide deck, which is intended to supplement our prepared remarks during today's call and provides the reconciliation of differences between GAAP and non GAAP financial measures. We have recast certain prior period amounts to reflect the FY25 changes to the composition of our segments announced in August 2024. Additional details, including FY23 and FY24 recast segment revenue, operating income and product and service level revenue can be found in the Financial Statements file on the Investor Relations website. More detailed Outlook slides will also be available on the Microsoft Investor Relations website when we provide Outlook commentary on today's call. On this call we will discuss certain non GAAP items. The non GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with gaap. They are included as additional clarifying items to aid investors in further understanding the company's first quarter performance. In addition to the impact these items and events have on the financial results. All growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. We will also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations where growth rates are the same in constant currency, we will refer to the growth rate only. We will post our prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript and in any future use of the recording. You can replay the call and view the transcript on the Microsoft Investor Relations website. During this call we will be making forward looking statements which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call and in the Risk Factors section of our Form 10K, Forms 10Q and other reports and filings with the securities and Exchange Commission. We do not undertake any duty to update any forward looking statement and with that I'll turn the call over to Satya. Thank you, Brett we are off to a solid start to our fiscal year driven by continued strength of Microsoft Cloud which surpassed $38.9 billion in revenue, up 22%. AI driven transformation is changing work, work artifacts and workflow across every role, function and business process, helping customers drive new growth and operating leverage all up. Our AI business is on track to surpass an annual revenue run rate of 10 billion DOL, which will make it the fastest business in our history to reach this milestone. Now I'll highlight examples of our progress starting with Infrastructure Azure took share this quarter we are seeing continued growth in cloud migration. Azure Arc now has over 39,000 customers across every industry including American Tower CTT L'Oreal, up more than 80% year over year. We now have data centers in over 60 regions around the world and this quarter we announced new cloud and AI infrastructure investments in Brazil, Italy, Mexico and Sweden as we expand our capacity in line with our long term demand signals. At the silicon layer. Our new Cobalt 100 VMs are being used by companies like Databricks, Elastic, Siemens, Snowflake and Synopsys to power their general purpose workloads at up to 50% better price performance than previous generations generations. On top of this we are building out our next generation AI infrastructure, innovating across the full stack to optimize our fleet for AI workloads. We offer the broadest selection of AI accelerators including our first party accelerator Maya100 as well as the latest GPUs from AMD and Nvidia. In fact, we are the first cloud to bring up Nvidia's Blackwell system with GB200 powered AI servers. Our partnership with OpenAI also continues to deliver results. We have an economic interest in a company that has grown significantly in value and we have built differentiated IP and are driving revenue momentum more broadly. With Azure AI, we are building an end to end app platform to help customers build their own copilots and agents. Azure OpenAI usage more than doubled over the past six months as both digital natives like Grammarly and Harvey as well as esports established enterprises like Bajaj Finance, Hitachi KT and LG move apps from test to production. GE Aerospace, for example, used Azure OpenAI to build a new digital assistant for all 52,000 of its employees in just three months. It has been used to conduct over 500,000 internal queries and process more than 200,000 documents. And this quarter we added support for OpenAI's newest model, Family 01. We're also bringing industry specific models to Azure AI, including a collection of best in class multimodal models for medical imaging. With GitHub models, we now provide access to our full model catalog directly within the GitHub developer workflow. Azure AI is also increasingly an on ramp to our data and analytics services as developers build new AI apps on Azure. We have seen an acceleration of Azure Cosmos DB and Azure SQL DB hyperscale usage as customers like Air India, Novo Nordisk, Telefonica, Toyota Motor North America and Uniper take advantage of capabilities purpose built for AI applications. And with Microsoft Fabric we provide a single AI powered platform to help customers like Chanel ey, kpmg, Swissair and Syndigo unify their data across clouds. We now have over 16,000 paid fabric customers, over 70% of the Fortune 500. Now on to developers. GitHub Copilot is changing the way the world builds software Copilot enterprise customers increase 55% quarter over quarter as companies like AMD and Flutter Entertainment tailor Copilot to their own code base. And we are introducing the next phase of AI code generation, making GitHub Copilot agentic across the developer workflow. GitHub Copilot workspace is a developer environment which leverages agents from start to finish so developers can go from spec to plan to code, all in natural language. Copilot autofix is an AI agent that helps developers at companies like Assyrian and Auto Group fix vulnerabilities in their code over three times faster than it would take them on their own. We're also continuing to build on GitHub's open platform ethos by making more models available via GitHub Copilot. And we are expanding the reach of GitHub to a new segment of developers, introducing GitHub Spark, which enables anyone to build apps in natural language. Already we have brought Generative AI to Power Platform to help customers use low code no code tools to cut costs and development time. To date, nearly 600,000 organizations have used AI powered capabilities in Power Platform up 4x year over year. Citizen developers at ZF, for example, built apps simply by describing what they need using natural language. And this quarter we introduced new ways for customers to apply AI to streamline complex workflows with Power Automate. Now on to work. We launched the next wave of Microsoft 365 copilot innovation last month, bringing together web work and Pages as the new design system for knowledge Work. Pages is the first new digital Artifact for the AI age and it's designed to help you ideate with AI and collaborate with other people. We've also made Microsoft 365 copilot responses 2x faster and improved response quality by nearly 3x. This innovation is driving accelerated usage and the number of people using Microsoft 365 daily more than doubled quarter over quarter. We're also seeing increased adoption from customers in every industry as they use Microsoft 365 copilot to drive real business value. Vodafone, for example, will roll out Microsoft 365 copilot to 68,000 employees after a trial showed that on average they saved three hours per person per week. And UBS will deploy 50,000 seats in our largest Finserv deal to date. And we continue to see enterprise customers coming back to buy more seats all up. Nearly 70% of the Fortune 500 now use Microsoft 365 copilot and customers continue to adopt it as a F than any other new Microsoft 365 suite. Copilot is the UI for AI and with Microsoft 365 Copilot, Copilot Studio and Agents and now autonomous agents, we have built an end to end system for AI business transformation. With Copilot Studio, organizations can build and connect Microsoft 365 copilot to autonomous agents which then delegate to Copilot when there is an Exception. More than 100,000 organizations from Ensure Standard bank and Thomson Reuters to Virgin Money and Zurich Insurance have used Copilot Studio to date up over 2x quarter over quarter. More broadly, we are seeing AI drive a fundamental change in the business applications market as customers shift from Legacy apps to AI first business processes. Dynamics 365 continues to take share as organizations like Evron, Heineken and Lexmark chose our apps over other providers and monthly active users of Copilot across our CRM and ERP portfolio increased over 60% quarter over quarter. Our Dynamics 365 contact center is also winning customers like Currys, Le Croisette and Rxo as it brings generative AI to every customer engagement channel. And just last week we added 10 out of the box autonomous agents to Dynamics 365 that helps customers automatically qualify sales leads, track suppliers and work hand in hand with service reps to resolve issues, we're also bringing AI to industry specific workflows one year in DAX Copilot is now documenting over 1.3 million physician patient encounters each month at over 500 health care organizations like Baptist Medical Group, Baylor, Scott and White Great and Baltimore Medical Center, Novant Health and Overlake Medical Center. It is showing faster revenue growth than GitHub Copilot did in this first year. And new features extend DAX beyond notes, helping physicians automatically draft referrals after visit instructions and diagnostic evidence. On top of all this AI innovation, Microsoft Teams usage remains at all time highs as people use it to streamline all their communications. Nearly 75% of our team's enterprise customers now buy premium phone or rooms. When it comes to Windows, our new class of copilot plus PCs is winning new customers. They offer best in class AI capability, performance and value. AMD, intel and Qualcomm now all support Copilot plus PCs. This quarter we also introduced new AI experience only available on CoPilot PCs like click to do, which places an interactive overlay over your desktop to suggest next best actions. And as we approach the end of Support for Windows 10 a year from now, we are well positioned to transition our customers to Windows 11, ensuring they benefit from enhanced features and security improvements we've introduced over the past few years. Now on to security we continue to prioritize security above all else. With our Secure Future initiative, we have dedicated the equivalent of 34,000 full time engineers to address the highest priority security tasks. We have made significant progress to better protect tenants, identities, networks and engineering systems. And we have created new processes to ensure security is prioritized at every level of the company. And we continue to take what we learn and turn it into innovations across our products. Security Copilot, for example, is being used by companies in every industry including Clifford, Chance, Intesa, Sao Paulo and shell to perform SecOps tasks faster and more accurately. And we are now helping customers protect their AI deployments too. Customers have used Defender to discover and Secure more than 750,000 gen AI app instances and use Purview to audit over a billion Copilot interactions to meet their compliance obligations. In all up, we continue to take share across all major categories. We serve and are consistently recognized by top analysts as a leader in 20 categories more than any other vendor. Now let me turn to our consumer businesses, starting with LinkedIn. Member growth continues to accelerate with markets in India and Brazil both growing at double digits. We're also seeing record engagement as we introduce new ways for our more than 1 billion members to connect, sell services, get hired and share knowledge. Our investments in rich formats like video strengthen our leadership in B2B advertising and amplify the value we deliver to our customers. Weekly immersive video views increased 6x quarter over quarter and total video viewership on LinkedIn is up 36% year over year. Our AI powered tools also continue to transform how people sell, learn and hire in sales. New AI features help every team member perform at the level of top sellers and drive more profitable growth in learning. Just yesterday we announced updates to our coaching experience, including personalized career development plans. LinkedIn's first agent hiring Assistant will help hirers find qualified candidates faster by tackling the most time consuming tasks. Already, hirers who use AI assistant Messages see a 44% higher acceptance rate compared to those who don't, and our hiring business continues to take share. Now onto search, advertising and news With Copilot, we are seeing the first step towards creating a new AI companion for everyone with new Copilot experience we introduced earlier this month includes a refreshed design and tone along with improved speed and fluency across the web and mobile, and it includes advanced capabilities like voice and vision that make it more delightful and useful and feel more natural. You can both browse and converse with Copilot simultaneously because Copilot sees what you see more broadly. AI is also transforming search, browsers and digital advertising and we continue to take share across Bing and Edge. Bing XTAC Revenue growth outpaced the search market now on to gaming. One year since we closed our acquisition of Activision Blizzard King, we are focused on building a business position for long term growth driven by higher margin content and services. You already see this transformation in our results as we diversify the ways that gamers access our content. We set new records for monthly active users in the quarter as more players than ever play our games across devices and on the Xbox platform. Game Pass also set a new Q1 record for total revenue and average revenue per subscriber. And as we look ahead, our IP across our studios has never been stronger. Last week's launch of Black Ops 6 was the biggest Call of Duty release ever, setting a record for Day one players as well as Game Pass subscriber ads on launch day and unit sales on PlayStation and Steam were also up over 60% year over year. This speaks to our strategy of meeting gamers where they are by enabling them to play more games across the screens they spend their time on. In closing, we are rapidly innovating to expand our opportunity across our commercial and consumer businesses. In three weeks time we will hold our Ignite conference and I look forward to sharing more then about how we are helping every business function use AI to drive growth in this new era. With that let me turn it over to Amy. Thank you Satya and good afternoon everyone. This quarter revenue was $65.6 billion up 16% and earnings per share was $3.30 an increase of 10%. With strong execution by our sales teams and partners, we delivered a solid start to our fiscal year with double digit top and bottom line growth. We also saw continued share gains across many of our businesses in our commercial business. Increased demand and growth in long term commitments to our Microsoft Cloud platform drove our results. Commercial bookings were ahead of expectations and increased 30% and 23% in constant currency. Results were driven by strong execution across our core annuity sales motions and growth in the number of $10 million plus contract for both Azure and Microsoft 365. Additionally we also saw an increase in the number of $100 million plus contracts for Azure. Commercial remaining performance obligation increased 22% and 21% in constant currency to $259 billion. Roughly 40% will be recognized in revenue in the next 12 months up 17% year over year. The remaining portion recognized beyond the next 12 months increased 27% and this quarter our annuity mix increased to 98%. In addition to commercial results that were in line with expectations, we also saw some benefit from in period revenue recognition across Microsoft 365 commercial Azure and our on premises server business. 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 5 cent 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 $911 million from purchase, accounting adjustments, integration and transaction related cost. FX did not have a significant impact on our results and was roughly in line with expectations on total company revenue segment level, revenue cogs and operating expense growth. Microsoft Cloud revenue was $38.9 billion and grew 22% roughly in line with expectations. Microsoft Cloud Gross margin percentage decreased 2 points year over year to 71%. This was slightly better than expected due to improvement in Azure, although the gross margin percentage decrease year over year continues to be driven by scaling our AI infrastructure company gross margin dollars increased 13% and 14% in constant currency and gross margin percentage was 69% down 2 points year over year driven by the lower Microsoft cloud gross margin noted earlier as well as the impact from purchase accounting adjustments, integration and transaction related cost from the Activision acquisition. Operating expenses increased 12% lower than expected due to our focus on cost efficiencies and ongoing prioritization work. Operating expense growth included 9 points from the Activision acquisition at a total company level. Headcount at the end of September was 8% higher than a year ago. Excluding the growth from the Activision acquisition, headcount was 2% higher. Operating income increased 14% and operating margins were 47% down 1 point year over year. Excluding the net impact from the Activision acquisition, operating margins were up 1 point as we continue to drive efficiencies across our businesses as we invest in AI infrastructure and capabilities now to our segment Results Revenue from productivity and business processes was $28.3 billion and grew 12% and 13% in constant currency ahead of expectations driven by better than expected results across all businesses. M365 Commercial Cloud revenue increased 15% and 16% in constant currency with business trends that were as expected. The better than expected result was due to a small benefit from the in period revenue recognition noted earlier. ARPU growth was Primarily driven by E5 as well as M365 copilot paid. M365 commercial seats grew 8% year over year with installed base expansion across all customer segments. Seat growth was driven by our small and medium business and frontline worker offerings. M365 commercial cloud revenue represents nearly 90% of total M365 commercial products and cloud services. M365 commercial products revenue increased 2% and 3% in constant currency ahead of expectations primarily due to the benefit from in period revenue recognition noted earlier. M365 consumer products and cloud services revenue increased 5% and 6% in constant currency. M365 consumer cloud revenue increased 6% and 7% in constant currency with continued momentum in M365 consumer subscriptions which grew 10% to 84.4 million. M365 consumer cloud revenue represents 85% of total M365 consumer products and cloud services. LinkedIn revenue increased 10% and 9% in constant currency slightly ahead of expectations with growth across all lines of business. Dynamics revenue grew 14% driven by Dynamics 365 which grew 18% and 19% in constant currency with continued growth across all workloads and continued share gains. As a reminder, Dynamics365 represents about 90% of total Dynamics revenue segment gross margin dollars increased 11% and 12% in constant currency and gross margin percentage decreased slightly year over year. Driven by scaling our AI infrastructure, operating expenses increased 2% and operating income increased 16%. Next, the intelligent cloud segment revenue was $24.1 billion, increasing 20% and 21% in constant currency in line with expectations. Azure and other cloud services revenue grew 33% and 34% in constant currency with healthy consumption trends that were in line with expectations. The better than expected result was due to the small benefit from in period revenue recognition noted earlier. Azure growth included roughly 12 points from AI services similar to last quarter. Demand continues to be higher than our available capacity. Non AI growth trends were also in line with expectations in total and across regions. As customers continued to migrate and modernize on the Azure platform. The non AI point contribution to Azure growth was sequentially lower by approximately 1 point. In our on premises server business, revenue decreased 1% lower than expected. Transactional purchasing ahead of the Windows Server 2025 launch as well as lower purchasing of licenses running in multi cloud environments was mostly offset by the benefit from in period revenue recognition noted earlier. Enterprise and partner services revenue decreased 1% and was relatively unchanged in constant currency segment. Gross margin dollars increased 15% and gross margin percentage decreased 3 points year over year. Driven by scaling our AI infrastructure, operating expenses increased 8% and operating income grew 18% now to more personal computing. Revenue was $13.2 billion increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations driven by gaming and search, Windows OEM and devices. Revenue increased 2% year over year as better than expected results in Windows OEM due to mix shift to higher monetizing markets was partially offset by the lower than expected results in devices due to execution challenges. In the commercial segment. Search and news advertising revenue EX TAC increased 18% and 19% in constant currency ahead of expectations primarily due to continued execution improvement. We saw rate expansion in addition to healthy volume growth in both Edge and Bing and in gaming. Revenue increased 43% and 44% in constant currency with 43 points of net impact from the Activision acquisition. Results were ahead of expectation driven by stronger than expected performance in both first and third party content as well as consoles, Xbox content and services revenue increased 61% with 53 points of net impact from the Activision acquisition segment. Gross margin dollars increased 16% and 17% in constant currency with 12 points of net impact from the Activision acquisition. Gross margin percentage was relatively unchanged year over year. Our strong execution on Margin improvement in gaming and search was offset by sales mix shift to those businesses. Operating expenses increased 49% with 51 points from the Activision acquisition. Operating income decreased 4%. Now back to total company results. Capital expenditures including finance leases were $20 billion in line with expectations and cash paid for PP and E was $14.9 billion. Roughly half of our cloud and AI related spend continues to be for long lived assets that will support monetization over the next 15 years and beyond. The remaining cloud and AI spend is primarily for servers, both CPUs and GPUs to serve customers based on demand signals. Cash flow from operations was $34.2 billion up 12% driven by strong cloud billings and collections, partially offset by higher supplier, employee and tech payments. Free cash flow was $19.3 billion down 7% year over year, reflecting higher capital expenditures to support our cloud and AI offerings this quarter. Other income expense was negative $283 million, significantly more favorable than anticipated due to foreign currency remeasurement and net gains on investments. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19% and finally we returned $9 billion to shareholders through dividends and share repurchases. Now moving to our Q2 outlook which unless specifically noted otherwise is on a US dollar basis. First FX with the weaker US dollar and assuming current rates remain stable, we expect FX to increase total revenue and segment level revenue growth by less than 1 point. We expect FX to have no meaningful impact to COGS or operating expense growth. Our outlook has many of the trends we saw in Q1 continue through Q2. Customer demand for our differentiated solutions should drive another quarter of strong growth in commercial bookings. We expect strong growth on a growing expiry base driven by increased long term commitments to our platform and strong execution across core annuity sales motions. 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 signals. As I said last quarter, we will stay aligned and if needed adjust to the demand signals we see. 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. Starting with productivity and business processes, we are the market leader when it comes to knowledge based copilots. Agents in the enterprise space and we are focused on continuing to gain share across our productivity solutions. Therefore, we expect revenue and productivity in business processes to grow between 10 and 11% in constant currency or 28.7 to US$29 billion. M365 commercial cloud revenue growth should be approximately 14% in constant currency with moderating seat growth across customer segments and ARPU growth through E5 and M365 copilot. For H2 we expect revenue growth to remain relatively stable compared to Q2. We continue to see growth in M365 copilot seats and we expect the related revenue to continue to grow gradually over time. For M365 commercial products, we expect revenue to decline in the low single digits. As a reminder, M365 commercial products include on premises components of M365 Suites, so our quarterly revenue growth can have variability primarily from in period revenue recognition depending on the mix of contracts. M365 consumer cloud revenue growth should be in the mid single digits driven by M365 subscriptions. For LinkedIn we expect revenue growth of approximately 10% driven by continued growth across all businesses and in Dynamics 365 we expect revenue growth to be in the mid to high teens driven by continued growth across all workloads. Next Intelligent Cloud Helping our customers transform and grow with innovative cloud and AI solutions is driving continued growth in Azure. Therefore we expect revenue in Intelligent Cloud to grow between 18 and 20% in constant currency or 25.55 to US$25.85 billion. Revenue will continue to be driven by Azure which as a reminder can have quarterly variability primarily from inquiry Revenue Recognition Depending on the mix of contracts in Azure, we expect Q2 revenue growth to be 31 to 32% in constant currency driven by strong demand for our portfolio of services. We expect consumption growth to be stable compared to Q1 and we expect to add more sequential dollars to Azure than any other quarter in history. We expect the contribution from AI services to be similar to last quarter given the continued capacity constraints as well as some capacity that shifted out of Q2 and in H2 we still expect Azure growth to accelerate from H1 as our capital investments create an increase in available AI capacity to serve more of the growing demand. And in our on premises server business we expect revenue to decline in the low to mid single digits on a prior year comparable that benefited from purchasing ahead Of Windows Server 2012 end of support and in enterprise and partner services we expect revenue growth to be in the low single digits. Now to more personal computing. We continue to make decisions to prioritize strategic higher margin opportunities within each of our consumer businesses. Our outlook reflects the improvement in gross and operating margins from this prioritization work. Across gaming, search and devices, we expect revenue and more personal computing to be 13.85 to US$14.25 billion. Windows OEM and devices revenue should decline in the low to mid single digits. We expect Windows OEM revenue growth in line with the PC market to be more than offset by a decline in devices as the trends from Q1 continue. Search and News Advertising ex tech revenue growth should be in the high teens with continued growth in both volume and revenue per search. This will be higher than overall search and news advertising revenue growth which we expect to be in the high single digits. And in gaming we expect revenue to decline in the high single digits due to hardware. We expect Xbox content and services revenue growth to be relatively flat we're excited about last week's launch of Call of Duty, where we saw the most Game Pass subscriber ads we've ever seen on a launch day. There are two things about the launch that are different than the Call of Duty launch a year ago where revenue was mostly recognized in the quarter of purchase. First, the game is available on Game Pass, so for players who play through Game Pass, the subscription revenue is recognized over time. Second, the game requires an online connection to play, so even for players who purchase the standalone game, revenue recognition will also occur ratably over time. Now back to company guidance. We expect COGS to grow between 11 and 13% in constant currency or to be between 21.9 to US$22.1 billion and operating expense to grow approximately 7% in constant currency or to be Between 16.4 and US$16.5 billion. This should result in another quarter of operating margin expansion. Other income and expense is expected to be roughly negative $1.5 billion, primarily driven by our share of the expected loss from OpenAI which is accounted for under the equity method. As a reminder, we do not recognize mark to market gains or losses on equity method investments. As you heard from Satya, our strategic partnership and investment in OpenAI has been pivotal in building and scaling our AI business and positioning us as the leader in the AI platform wave. And lastly, we expect our Q2 effective tax rate to be approximately 19%. In closing, we remain focused on strategically investing in the long term opportunities that we believe drive shareholder value. Monetization from these investments continues to grow and we're excited that only two and a half years in our AI business is on track to surpass $10 billion of annual revenue run rate in Q2. This will be the fastest business in our history to reach this milestone. We are committed to growing this leadership position across our entire Microsoft cloud while maintaining our disciplined focus on cost management and prioritization across every team. With that, let's go to Q and A. Brett. Thanks, Amy. We'll now move over to Q and A. Out of respect for others on the call, we request that participants please only ask one question. Operator, can you please repeat your instructions? Thank you. Ladies and gentlemen, if you would like to ask a question, please press Star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. And our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed. Excellent. Thank you guys for taking the question and congratulations on a really solid quarter. Satya. The expansion of capabilities, the speed of innovation, the magnitude of the opportunities ahead for generative AI, it makes this the most exciting period for software I've seen in my 25 years of covering this space. And based upon this call, it seems like you share that excitement. But in my investor conversation, that excitement also feeds to relationships and they both have to do with constraints. And the first is like what are the internal constraints or guardrails that Microsoft has when it comes to investing behind these innovations, particularly in relation to the funding of future generations of foundational models where people are talking about price tags, you own tens of billions or even $100 billion plus. And then on the other side of the spectrum, what are the external constraints that Microsoft sees in building out this capacity to meet the demand and capture the opportunity? Particularly constraints in your ability to power all these data center being built out and powered in an environmentally sustainable fashion. I'd love to get the Microsoft perspective on both those questions. Thank you, Keith, for those questions. I think on the first point, ultimately, when you think about, let's say a capital outlay for training, because that's essentially what you're asking, it is going to be rate limited by your monetization of inference in a given generation. So just like in the past, we would allocate capital to build out cloud based on the demand signal we were. Seeing and then we would then project. The demand and that's what we would build for. So you can think of training essentially. As that which is you're building the next generation model so that then you. Have a more capable model that then. Drives more inference demand. Right. So ultimately, even with all the scaling laws and what have you, I think you ultimately will normalize to having a pace. In fact, I think the best way to think about even is given that. Moore's Law effectively is working on the. Sort of silicon and system side. So it's just not compute, it's efficiencies. In compute, it's data as well as algorithms. You will want to sort of keep. On that curve, which is you really want to refresh your fleet with the Moore's Law every year and then effectively depreciate it over the period of the life cycle of it. And then the inference demand ultimately will govern how much we invest in training because that's, I think at the end of the day you're all subject to ultimately demand. The second piece of the external constraints we have run into obviously lots of external constraints because this demand all showed up pretty fast, right? I mean, if you think about even the most hit products of this generation, all are in our cloud, right? Whether it's ChatGPT, whether it's Copilot, whether it's GitHub, Copilot or even DAX Copilot, I mean, pick the top four or five products of this generation, they're all sort of in and around our ecosystem. And so therefore we ran into a set of constraints which are everything because DCs don't get built overnight. So there is, there's DC, there is power. And so that's sort of been the short term constraint. Even in Q2. For example, some of the demand issues we have or our ability to fulfill demand is because of in fact external third party stuff that we leased moving out. So that's the constraints we have. But in the long run we do need effectively power and we need DCs and some of these things are more long lead. But I feel pretty good that going into the second half of even this fiscal year that some of that supply demand will match up. Excellent. Thank you guys. Thanks Keith. Operator, Next question please. The next question comes from the line of Brent Thill with Jeffries. Please proceed. Thanks Amy. Good to hear the re acceleration in the back half for Azure. I guess many are asking 34% growth in Q1 falling to low 30s. I know the comp is a couple points harder, but is there anything else you're contemplating in that guide for Q2 to see that deceleration other than a tougher comp? Thank you. Thanks Brent, maybe this is a great question because I can sort of reiterate some of the points I made and tie them together a little bit in Q1. The 34 in CC as we talked about that upside versus the 33 that we had guided to is primarily due to some revenue recognition benefits. And so I think about that on a sort of a pure consumption basis and AI as being 33 and you think about a point or two of decel that we've guided to and the majority of that is due to an unfortunately some supply pushouts that I mentioned and then Satya reiterated in terms of AI supply coming online that we counted on the underlying consumption growth is stable Q1 to Q2 and so to your question on some ins and outs. It is certainly some ins and outs. I do, as you heard, have confidence as we get a good influx of supply across the second half of the year, particularly on the AI side, that will be better able to do some supply demand matching and hence why we're talking about acceleration in the back half. I'll also take the opportunity to say when you see usage in AI workloads, we always intend to think about that as just a GPU exercise. The importance of having GPUs and CPUs be able to run these workloads is also important. So that's a piece of the acceleration at H2 as well. Thanks, Brent. Operator, Next question please. The next question comes from the line of Mark Mordler with Bernstein. Please proceed. Thank you very much for taking my question and congratulations on the quarter. The question every investor obviously asks is the question on the CAPEX growth and the CapEx spend, obviously half of that facility is equivalent that have longer life, but the other half is the rest of the components. Can you give any color on how you think of that growth? Does it return to the traditional approach where basically capex is going to grow in line or slightly slower than cloud revenue? If so, any sense of the timing? Do we have enough facilities online by sometime next year, et cetera? Any color would be appreciated. Thanks Mark. You know, I think in some ways it's helpful to go back to the cloud transitions that we worked on over a decade ago. I think in the early stages and what you did see and you'll see us do in the same time is you have to build to meet demand. Unlike the cloud transition, we're doing it on a global basis, in parallel, as opposed to sequential, given the nature of the demand. And then as long as we continue to see that demand grow. You're right, the Growth in capex will slow and the revenue growth will increase. And those two things to your point, get closer and closer together over time. The pace of that entirely depends really on the pace of adoption. And to Satya's point, some of that spend goes toward building the next training infrastructure. So you won't see all of it in cogs, some of of it goes to OPEX when you're spending it on training. But in general that's a healthy way to think about the balance as over time those do and should, like the last cycle, get closer together. Thank you very much, that's very helpful. Thanks Mark. Operator, next question please. The next question comes from the line of Carl Kirsted with ubs. Please proceed. Okay, great, thank you. I'm actually not going to ask a question about the numbers, but Satya and Amy, I'd love to ask a question about OpenAI. Since the print three months ago, we investors have been hit with a torrent of media stories about OpenAI and Microsoft and I'd love to give Microsoft an opportunity to frame the relationship. It seems to me it's critically important. But we have been, I think everyone on the line picking up signals that perhaps Microsoft wants to diversify somewhat at the model layer and offer customers choice. So Satya, I'd love to get your framing of the relationship and then in terms of the numbers, maybe this is a little bit more for you Amy, but how does Microsoft manage the demands on capex from helping OpenAI with its scaling ambitions? And how do you manage the impact on other income that you just gave us some color on? Thank you so much. Sure. Thanks Carl. So I'd say first the partnership for both sides, that's OpenAI and Microsoft has been super beneficial. After all, we effectively sponsored what is one of the most highest valued private companies today when we invested in them and really took a bet on them and their innovation four, five years ago that has led to great success for Microsoft, led to great success for OpenAI and we continue to build on it. Right? So we serve them with world class infrastructure on which they do their innovation in terms of models on top of which we innovate on both the model layer with some of the post training stuff we do as well as some of the small models we build and then of course all of the product innovation. One of the things that my own sort of conviction of OpenAI and what they were doing came about when I started seeing something like GitHub Copilot as a product get built or Dax Copilot get built or M365 copilot get built. So we have a fantastic portfolio of innovation that we build on top of that. At the same also I would say we are investors, we feel very, very good about our investment stake in OpenAI and so our focus and we're always in constant dialogue with them. In a partnership like this, when both sides have achieved mutual success at the pace at which we've achieved it, that means we need to kind of push each other to do more to capture the moment and that's what we plan to do and we intend to keep building on it. And maybe to your other two questions, Carl, listen, I'm thrilled with their success and need for supply from Azure and infrastructure and really what it's meant in terms of being able to also serve other customers. For us, it's important that we continue to invest capital to meet not only their demand signal and needs for compute, but also from our broader customers. That's partially why you've seen us committing the amounts of capital we've seen over the past few quarters is our commitment to both grow together and for us to continue to grow the Azure platform for customers beyond them. And so I don't really think of it as how do you balance it. It's just we have customers who have needs and real use cases and delivering value today and if we can't meet that, we need to work to meet it. And that means working harder and faster to make sure we do that, which is what the team is committed to do. Second piece of your question I think was on the impact other income and not to get too accounting heavy on the earnings phone call, but I would say just a reminder, this is under the equity method, which means we just take our percentage of losses every quarter and those losses of course are capped by the amount of investment we make in total, which we did talk about in the queue this quarter as being $13 billion. And so over time that's just the constraint and it's a bit of a mechanical entry and so I don't really think about managing that. That's the investment and acceleration that OpenAI is making in themselves and we take a percentage of that. Got it. Okay, very helpful. Thank you both. Thanks, Carl. Operator, next question please. The next question comes from the line of Kash Rangan with Goldman Sachs. Please proceed. Hi, thank you very much. Sati, when you talked about the investment cycle, these models are getting bigger, more expensive, but you also pointed out to how in the inference phase we're likely to get paid. How does that cycle look like in. Inference for Microsoft, where are the products. And the applications that will show up. On the Microsoft P and L as. A result of the inference phase of AI kicking it? Thank you very much. Thanks, Keshe. I mean, the good news for us is that we're not waiting for that inference to show up. If you sort of think about the point we even made that this is going to be the fastest growth to. $10 billion of any business in our. History, it's all inference. One of the things that may not be. As evident is that we are. Not actually selling raw GPUs for other people to train. In fact, that's sort of a business we turn away because we have so much demand on inference that we are not taking what I would. In fact, there's a huge adverse selection problem today where people it's just a bunch of tech companies still using VC money to buy a bunch of GPUs. We kind of really are not even participating in most of that because we are literally going to the real demand, which is in the enterprise space or our own products like GitHub Copilot or M365 Copilot. So I feel the quality of our revenue is also pretty superior in that context. And that's what gives us even the conviction to even Amy's answers previously about our capital spend is if this was just all about a bunch of people training large models and that was all we got, then that would be ultimately still waiting to your point, for someone to actually have demand which is real. And in our case, the good news here is we have a diversified portfolio. We're seeing real demand across all of that portfolio. And Kash, maybe just to add a little bit to what Satya is saying, I think a part of his two answers is that what you're saying is this number we're talking about, the $10 billion across inference and our apps is already what that momentum and that investment and that progress and that revenue is what builds the next cycle of training. Right. And so it's that circle as opposed to, oh, we're doing training now and then inference. Much of the training investments that are and that fueled this revenue growth came before and we already funded that work. And so that's an important point. That's to your point that you invest now and you can get the growth later, even if you slow down the capex. That's what you're trying to tell us. That's the cycle that is important to understand. Got it. Thank you so much. Thanks. Cash operator. Next question. Please. The next question comes from the line of Mark Murphy with JP Morgan. Please proceed. Thank you very much. I'm wondering if you can shed any more light just on the nature of the supply limitations that you're mentioning that are impacting Azure in Q2, where that impact might be incrementally just a touch more than we expected. Is it more the GPU supply? Is there some element of power cooling or the ability to wire up the networks? Amy, should we infer that the supply is constraining Azure growth by roughly a couple few points in Q2, or am I overestimating that? Maybe. To answer both those questions, Mark, very directly, I wouldn't think about it. Component Logic in my Q2 answer, the supply push out, as Satya said, with third parties that are delivering later than we had expected, that gets pushed mainly into the second half of the year and in general Q3. So that third party is where we have tended to buy supply inclusive of kits. So it's complete end to end third party delivery. In terms of the impact, as I was saying, when you think about having flat consumption Q1 to Q2, there really are only two things that impact that difference. And one was the help we got in Q1 from the Revenue and Revenue and accounting help. And then Q2 has been the supply pushout. Thank you. Thanks, Mark. Operator, Next question please. The next question comes from the line of Ramo Lensho with Barclays. Please proceed. Perfect. Thank you. If you talk about the market at the moment, because you were first at Copilot, you had identified a lot with Copilots and. And now we're talking agents. Can you kind of. Satya, how do you think about that? To me it looks like an evolution that we're discovering how to kind of productize AI better, etc. So how do you think about that journey between Copilot's agents and maybe what's coming next? Thank you. Sure. The system we have built is Copilot, Copilot Studio, agents and autonomous agents. You should think of that as the spectrum of things. Right. So ultimately, the way we think about how this all comes together is you need humans to be able to interface with AI. So the UI layer for AI is Copilot. You can then use Copilot Studio to extend Copilot. For example, you want to connect it to your CRM system, to your office system, to your HR system. You do that through Copilot Studio. By building agents effectively. You also build autonomous agents so you can use even. That's the announcement we made a couple of weeks ago is you can even use Copilot Studio to build autonomous agents. Now, these autonomous agents are working independently, but from time to time they need to raise an exception. So autonomous agents are not fully autonomous because at some point they need to either notify someone or have someone input something. And when they need to do that, they need a UI layer. And that's where, again, it's Copilot. So Copilot. Copilot agents built in Copilot Studio. Autonomous agents built in Copilot Studio. That's the full system, we think, that comes together and we feel very, very good about the positioning. And then of course, we are taking the underlying system services across that entire stack that I just talked about and I'm making it available in Azure. You have the RAW infrastructure, if you want it, you have the model layer independent of it, you have the AI app, server and Azure. AI everything is also a building block service in Azure for you to be able to build. In fact, if you want to build everything that we have built in the Copilot stack, you can build it yourself using the AI platform. So that's sort of, in simple terms, our strategy and that's kind of how it all comes together. Okay, perfect. Very clear. Thanks, Rabo Operator. We have time for one last question. And the last question will come from the line of Rishi Jaloria with rbc. Please proceed. Oh, wonderful. Thanks. Hi, Satya Hami. I appreciate the question. I want to go and think a little bit about Copilot, how we should be thinking about kind of numbers here with the recategorization. Seems like that was maybe softer in the past than expected or maybe with the numbers this quarter starting to pick up, can you maybe walk us through what you're seeing on that and maybe more importantly, how we should be thinking about your overall strategy on consumer versus enterprise, especially now with Mustafa on the pole. Thanks so much. Yeah. On the first part, Rishi, to your question. I think we feel very good about the momentum we have in the commercial Copilot, as I said in my remarks and Amy talked about, this is the fastest growth of a new suite in M365. If I compare it to what we saw even way back in E3 or E5 or the transition from O to M, this is really much faster. It's the numbers of penetration of the Fortune 500 and then the fact that they're coming back for more seats and what have you. So it's very strong in that context. The other thing I'll also mention is. That we want this to be something that is systemic because people need to be able to put the security controls. Then they need to deploy, then there's. Killing and then there's change management. So this is not like you just, it's not a tool like when I talk about copilot, Copilot Studio Agents. It's really as much about a new way to work. And sometimes I describe it as what happened throughout the 90s with PC penetration. After all, if you take a business process like forecasting, what was it like pre email and Excel and post email and Excel, that's the type of change that you see with copilot. But overall we feel great about the rate of progress and the penetration. And then on the consumer side look for us the exciting part here is to be able to use the same investment we are making in the commercial where we have structural strength and then. Be on the offense. One of the things that I think, I hope you all catch in our earnings is xtac, our revenue when it comes to what we describe as search, news and ads is growing faster than market. So that's, you know, it's fantastic to see that. And you know, so that's kind of a consumer business which you know, in Microsoft's large scope, you know, it's sort of even a ten plus billion dollar business sort of sometimes goes missing. But in our case it is actually a fantastic growth business that's growing faster than market. We feel good about how we will use AI in LinkedIn. In fact, LinkedIn is a consumer business business as you know, you saw even today, this week they announced some new capabilities for both consumers and in their case even recruiting. So we think that AI, the same investment gets monetized even through LinkedIn's innovation. And gaming of course is another place where you'll see some of these things apply. And Windows. So the place where I think I'm excited about is copilot plus PCs. For us it's not about having a disconnected edge, it's about having hybrid AI where the rebirth of sort of the PC as the edge of AI is going to be one of the most exciting things for developers. So we feel well positioned quite frankly with the same investment. So that's the thing, we're not a conglomerate here. We are sort of one company. That means we invest once and then we have all these categories that benefit from that. And that's the theory of the firm here for us. And so we feel good about all of that coming together and maybe just. To add one piece because I think. Rishi, now that I'm listening and thinking. Through the question, it feels like you're wondering why am I not seeing the copilot if you've made all this progress in the results and the answer is you already are in that M465 commercial number, we've seen that seat growth. But those seats that we're adding, the majority of them are driven by frontline worker and small businesses. Those have a lower ARPU point. And so it masks some of the ARPU that we're already seeing, not just from E5, which continues to contribute, but also this quarter additional impact from copilot. So as we go forward, because being able, that is where you're going to see the impact will be in ARPU in M365 commercial. And as Satya said, I think you'll see the impact of copilot engagement frankly across the same XTAC number. Wonderful. Thank you. Thanks, Rishi. That wraps up the Q and A portion of today's earnings call. Thank you for joining us today and we look forward to speaking with all of you again soon. Thank you. This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.",
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          "text": "Thanks Brent, maybe this is a great question because I can sort of reiterate some of the points I made and tie them together a little bit in Q1. The 34 in CC as we talked about that upside versus the 33 that we had guided to is primarily due to some revenue recognition benefits. And so I think about that on a sort of a pure consumption basis and AI as being 33 and you think about a point or two of decel that we've guided to and the majority of that is due to an unfortunately some supply pushouts that I mentioned and then Satya reiterated in terms of AI supply coming online that we counted on the underlying consumption growth is stable Q1 to Q2 and so to your question on some ins and outs. It is certainly some ins and outs. I do, as you heard, have confidence as we get a good influx of supply across the second half of the year, particularly on the AI side, that will be better able to do some supply demand matching and hence why we're talking about acceleration in the back half. I'll also take the opportunity to say when you see usage in AI workloads, we always intend to think about that as just a GPU exercise. The importance of having GPUs and CPUs be able to run these workloads is also important. So that's a piece of the acceleration at H2 as well.",
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          "text": "Thank you very much for taking my question and congratulations on the quarter. The question every investor obviously asks is the question on the CAPEX growth and the CapEx spend, obviously half of that facility is equivalent that have longer life, but the other half is the rest of the components. Can you give any color on how you think of that growth? Does it return to the traditional approach where basically capex is going to grow in line or slightly slower than cloud revenue? If so, any sense of the timing? Do we have enough facilities online by sometime next year, et cetera? Any color would be appreciated.",
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          "text": "Thanks Mark. You know, I think in some ways it's helpful to go back to the cloud transitions that we worked on over a decade ago. I think in the early stages and what you did see and you'll see us do in the same time is you have to build to meet demand. Unlike the cloud transition, we're doing it on a global basis, in parallel, as opposed to sequential, given the nature of the demand. And then as long as we continue to see that demand grow. You're right, the Growth in capex will slow and the revenue growth will increase. And those two things to your point, get closer and closer together over time. The pace of that entirely depends really on the pace of adoption. And to Satya's point, some of that spend goes toward building the next training infrastructure. So you won't see all of it in cogs, some of of it goes to OPEX when you're spending it on training. But in general that's a healthy way to think about the balance as over time those do and should, like the last cycle, get closer together.",
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          "text": "Thank you, Keith, for those questions. I think on the first point, ultimately, when you think about, let's say a capital outlay for training, because that's essentially what you're asking, it is going to be rate limited by your monetization of inference in a given generation. So just like in the past, we would allocate capital to build out cloud based on the demand signal we were.",
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          "text": "Greetings and welcome to the Microsoft Fiscal Year 2025 First Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Iverson, Vice President of Investor Relations. Please go ahead.",
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          "text": "Good afternoon and thank you for joining us today. On the call with me are Satya Nadella, Chairman and Chief Executive Officer Amy Hood, Chief Financial Officer Alice Jala, Chief Accounting Officer and Keith Dolliver, Corporate Secretary and Deputy General Counsel. On the Microsoft Investor Relations website you can find our earnings press release and Financial Summary Slide deck, which is intended to supplement our prepared remarks during today's call and provides the reconciliation of differences between GAAP and non GAAP financial measures. We have recast certain prior period amounts to reflect the FY25 changes to the composition of our segments announced in August 2024. Additional details, including FY23 and FY24 recast segment revenue, operating income and product and service level revenue can be found in the Financial Statements file on the Investor Relations website. More detailed Outlook slides will also be available on the Microsoft Investor Relations website when we provide Outlook commentary on today's call. On this call we will discuss certain non GAAP items. The non GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with gaap. They are included as additional clarifying items to aid investors in further understanding the company's first quarter performance. In addition to the impact these items and events have on the financial results. All growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. We will also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations where growth rates are the same in constant currency, we will refer to the growth rate only. We will post our prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript and in any future use of the recording. You can replay the call and view the transcript on the Microsoft Investor Relations website. During this call we will be making forward looking statements which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call and in the Risk Factors section of our Form 10K, Forms 10Q and other reports and filings with the securities and Exchange Commission. We do not undertake any duty to update any forward looking statement and with that I'll turn the call over to Satya.",
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          "text": "The next question comes from the line of Mark Mordler with Bernstein. Please proceed.",
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          "text": "Thank you so much.",
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          "text": "Thank you, Brett we are off to a solid start to our fiscal year driven by continued strength of Microsoft Cloud which surpassed $38.9 billion in revenue, up 22%. AI driven transformation is changing work, work artifacts and workflow across every role, function and business process, helping customers drive new growth and operating leverage all up. Our AI business is on track to surpass an annual revenue run rate of 10 billion DOL, which will make it the fastest business in our history to reach this milestone. Now I'll highlight examples of our progress starting with Infrastructure Azure took share this quarter we are seeing continued growth in cloud migration. Azure Arc now has over 39,000 customers across every industry including American Tower CTT L'Oreal, up more than 80% year over year. We now have data centers in over 60 regions around the world and this quarter we announced new cloud and AI infrastructure investments in Brazil, Italy, Mexico and Sweden as we expand our capacity in line with our long term demand signals. At the silicon layer. Our new Cobalt 100 VMs are being used by companies like Databricks, Elastic, Siemens, Snowflake and Synopsys to power their general purpose workloads at up to 50% better price performance than previous generations generations. On top of this we are building out our next generation AI infrastructure, innovating across the full stack to optimize our fleet for AI workloads. We offer the broadest selection of AI accelerators including our first party accelerator Maya100 as well as the latest GPUs from AMD and Nvidia. In fact, we are the first cloud to bring up Nvidia's Blackwell system with GB200 powered AI servers. Our partnership with OpenAI also continues to deliver results. We have an economic interest in a company that has grown significantly in value and we have built differentiated IP and are driving revenue momentum more broadly. With Azure AI, we are building an end to end app platform to help customers build their own copilots and agents. Azure OpenAI usage more than doubled over the past six months as both digital natives like Grammarly and Harvey as well as esports established enterprises like Bajaj Finance, Hitachi KT and LG move apps from test to production. GE Aerospace, for example, used Azure OpenAI to build a new digital assistant for all 52,000 of its employees in just three months. It has been used to conduct over 500,000 internal queries and process more than 200,000 documents. And this quarter we added support for OpenAI's newest model, Family 01. We're also bringing industry specific models to Azure AI, including a collection of best in class multimodal models for medical imaging. With GitHub models, we now provide access to our full model catalog directly within the GitHub developer workflow. Azure AI is also increasingly an on ramp to our data and analytics services as developers build new AI apps on Azure. We have seen an acceleration of Azure Cosmos DB and Azure SQL DB hyperscale usage as customers like Air India, Novo Nordisk, Telefonica, Toyota Motor North America and Uniper take advantage of capabilities purpose built for AI applications. And with Microsoft Fabric we provide a single AI powered platform to help customers like Chanel ey, kpmg, Swissair and Syndigo unify their data across clouds. We now have over 16,000 paid fabric customers, over 70% of the Fortune 500. Now on to developers. GitHub Copilot is changing the way the world builds software Copilot enterprise customers increase 55% quarter over quarter as companies like AMD and Flutter Entertainment tailor Copilot to their own code base. And we are introducing the next phase of AI code generation, making GitHub Copilot agentic across the developer workflow. GitHub Copilot workspace is a developer environment which leverages agents from start to finish so developers can go from spec to plan to code, all in natural language. Copilot autofix is an AI agent that helps developers at companies like Assyrian and Auto Group fix vulnerabilities in their code over three times faster than it would take them on their own. We're also continuing to build on GitHub's open platform ethos by making more models available via GitHub Copilot. And we are expanding the reach of GitHub to a new segment of developers, introducing GitHub Spark, which enables anyone to build apps in natural language. Already we have brought Generative AI to Power Platform to help customers use low code no code tools to cut costs and development time. To date, nearly 600,000 organizations have used AI powered capabilities in Power Platform up 4x year over year. Citizen developers at ZF, for example, built apps simply by describing what they need using natural language. And this quarter we introduced new ways for customers to apply AI to streamline complex workflows with Power Automate. Now on to work. We launched the next wave of Microsoft 365 copilot innovation last month, bringing together web work and Pages as the new design system for knowledge Work. Pages is the first new digital Artifact for the AI age and it's designed to help you ideate with AI and collaborate with other people. We've also made Microsoft 365 copilot responses 2x faster and improved response quality by nearly 3x. This innovation is driving accelerated usage and the number of people using Microsoft 365 daily more than doubled quarter over quarter. We're also seeing increased adoption from customers in every industry as they use Microsoft 365 copilot to drive real business value. Vodafone, for example, will roll out Microsoft 365 copilot to 68,000 employees after a trial showed that on average they saved three hours per person per week. And UBS will deploy 50,000 seats in our largest Finserv deal to date. And we continue to see enterprise customers coming back to buy more seats all up. Nearly 70% of the Fortune 500 now use Microsoft 365 copilot and customers continue to adopt it as a F than any other new Microsoft 365 suite. Copilot is the UI for AI and with Microsoft 365 Copilot, Copilot Studio and Agents and now autonomous agents, we have built an end to end system for AI business transformation. With Copilot Studio, organizations can build and connect Microsoft 365 copilot to autonomous agents which then delegate to Copilot when there is an Exception. More than 100,000 organizations from Ensure Standard bank and Thomson Reuters to Virgin Money and Zurich Insurance have used Copilot Studio to date up over 2x quarter over quarter. More broadly, we are seeing AI drive a fundamental change in the business applications market as customers shift from Legacy apps to AI first business processes. Dynamics 365 continues to take share as organizations like Evron, Heineken and Lexmark chose our apps over other providers and monthly active users of Copilot across our CRM and ERP portfolio increased over 60% quarter over quarter. Our Dynamics 365 contact center is also winning customers like Currys, Le Croisette and Rxo as it brings generative AI to every customer engagement channel. And just last week we added 10 out of the box autonomous agents to Dynamics 365 that helps customers automatically qualify sales leads, track suppliers and work hand in hand with service reps to resolve issues, we're also bringing AI to industry specific workflows one year in DAX Copilot is now documenting over 1.3 million physician patient encounters each month at over 500 health care organizations like Baptist Medical Group, Baylor, Scott and White Great and Baltimore Medical Center, Novant Health and Overlake Medical Center. It is showing faster revenue growth than GitHub Copilot did in this first year. And new features extend DAX beyond notes, helping physicians automatically draft referrals after visit instructions and diagnostic evidence. On top of all this AI innovation, Microsoft Teams usage remains at all time highs as people use it to streamline all their communications. Nearly 75% of our team's enterprise customers now buy premium phone or rooms. When it comes to Windows, our new class of copilot plus PCs is winning new customers. They offer best in class AI capability, performance and value. AMD, intel and Qualcomm now all support Copilot plus PCs. This quarter we also introduced new AI experience only available on CoPilot PCs like click to do, which places an interactive overlay over your desktop to suggest next best actions. And as we approach the end of Support for Windows 10 a year from now, we are well positioned to transition our customers to Windows 11, ensuring they benefit from enhanced features and security improvements we've introduced over the past few years. Now on to security we continue to prioritize security above all else. With our Secure Future initiative, we have dedicated the equivalent of 34,000 full time engineers to address the highest priority security tasks. We have made significant progress to better protect tenants, identities, networks and engineering systems. And we have created new processes to ensure security is prioritized at every level of the company. And we continue to take what we learn and turn it into innovations across our products. Security Copilot, for example, is being used by companies in every industry including Clifford, Chance, Intesa, Sao Paulo and shell to perform SecOps tasks faster and more accurately. And we are now helping customers protect their AI deployments too. Customers have used Defender to discover and Secure more than 750,000 gen AI app instances and use Purview to audit over a billion Copilot interactions to meet their compliance obligations. In all up, we continue to take share across all major categories. We serve and are consistently recognized by top analysts as a leader in 20 categories more than any other vendor. Now let me turn to our consumer businesses, starting with LinkedIn. Member growth continues to accelerate with markets in India and Brazil both growing at double digits. We're also seeing record engagement as we introduce new ways for our more than 1 billion members to connect, sell services, get hired and share knowledge. Our investments in rich formats like video strengthen our leadership in B2B advertising and amplify the value we deliver to our customers. Weekly immersive video views increased 6x quarter over quarter and total video viewership on LinkedIn is up 36% year over year. Our AI powered tools also continue to transform how people sell, learn and hire in sales. New AI features help every team member perform at the level of top sellers and drive more profitable growth in learning. Just yesterday we announced updates to our coaching experience, including personalized career development plans. LinkedIn's first agent hiring Assistant will help hirers find qualified candidates faster by tackling the most time consuming tasks. Already, hirers who use AI assistant Messages see a 44% higher acceptance rate compared to those who don't, and our hiring business continues to take share. Now onto search, advertising and news With Copilot, we are seeing the first step towards creating a new AI companion for everyone with new Copilot experience we introduced earlier this month includes a refreshed design and tone along with improved speed and fluency across the web and mobile, and it includes advanced capabilities like voice and vision that make it more delightful and useful and feel more natural. You can both browse and converse with Copilot simultaneously because Copilot sees what you see more broadly. AI is also transforming search, browsers and digital advertising and we continue to take share across Bing and Edge. Bing XTAC Revenue growth outpaced the search market now on to gaming. One year since we closed our acquisition of Activision Blizzard King, we are focused on building a business position for long term growth driven by higher margin content and services. You already see this transformation in our results as we diversify the ways that gamers access our content. We set new records for monthly active users in the quarter as more players than ever play our games across devices and on the Xbox platform. Game Pass also set a new Q1 record for total revenue and average revenue per subscriber. And as we look ahead, our IP across our studios has never been stronger. Last week's launch of Black Ops 6 was the biggest Call of Duty release ever, setting a record for Day one players as well as Game Pass subscriber ads on launch day and unit sales on PlayStation and Steam were also up over 60% year over year. This speaks to our strategy of meeting gamers where they are by enabling them to play more games across the screens they spend their time on. In closing, we are rapidly innovating to expand our opportunity across our commercial and consumer businesses. In three weeks time we will hold our Ignite conference and I look forward to sharing more then about how we are helping every business function use AI to drive growth in this new era. With that let me turn it over to Amy.",
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          "text": "Thank you Satya and good afternoon everyone. This quarter revenue was $65.6 billion up 16% and earnings per share was $3.30 an increase of 10%. With strong execution by our sales teams and partners, we delivered a solid start to our fiscal year with double digit top and bottom line growth. We also saw continued share gains across many of our businesses in our commercial business. Increased demand and growth in long term commitments to our Microsoft Cloud platform drove our results. Commercial bookings were ahead of expectations and increased 30% and 23% in constant currency. Results were driven by strong execution across our core annuity sales motions and growth in the number of $10 million plus contract for both Azure and Microsoft 365. Additionally we also saw an increase in the number of $100 million plus contracts for Azure. Commercial remaining performance obligation increased 22% and 21% in constant currency to $259 billion. Roughly 40% will be recognized in revenue in the next 12 months up 17% year over year. The remaining portion recognized beyond the next 12 months increased 27% and this quarter our annuity mix increased to 98%. In addition to commercial results that were in line with expectations, we also saw some benefit from in period revenue recognition across Microsoft 365 commercial Azure and our on premises server business. 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 5 cent 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 $911 million from purchase, accounting adjustments, integration and transaction related cost. FX did not have a significant impact on our results and was roughly in line with expectations on total company revenue segment level, revenue cogs and operating expense growth. Microsoft Cloud revenue was $38.9 billion and grew 22% roughly in line with expectations. Microsoft Cloud Gross margin percentage decreased 2 points year over year to 71%. This was slightly better than expected due to improvement in Azure, although the gross margin percentage decrease year over year continues to be driven by scaling our AI infrastructure company gross margin dollars increased 13% and 14% in constant currency and gross margin percentage was 69% down 2 points year over year driven by the lower Microsoft cloud gross margin noted earlier as well as the impact from purchase accounting adjustments, integration and transaction related cost from the Activision acquisition. Operating expenses increased 12% lower than expected due to our focus on cost efficiencies and ongoing prioritization work. Operating expense growth included 9 points from the Activision acquisition at a total company level. Headcount at the end of September was 8% higher than a year ago. Excluding the growth from the Activision acquisition, headcount was 2% higher. Operating income increased 14% and operating margins were 47% down 1 point year over year. Excluding the net impact from the Activision acquisition, operating margins were up 1 point as we continue to drive efficiencies across our businesses as we invest in AI infrastructure and capabilities now to our segment Results Revenue from productivity and business processes was $28.3 billion and grew 12% and 13% in constant currency ahead of expectations driven by better than expected results across all businesses. M365 Commercial Cloud revenue increased 15% and 16% in constant currency with business trends that were as expected. The better than expected result was due to a small benefit from the in period revenue recognition noted earlier. ARPU growth was Primarily driven by E5 as well as M365 copilot paid. M365 commercial seats grew 8% year over year with installed base expansion across all customer segments. Seat growth was driven by our small and medium business and frontline worker offerings. M365 commercial cloud revenue represents nearly 90% of total M365 commercial products and cloud services. M365 commercial products revenue increased 2% and 3% in constant currency ahead of expectations primarily due to the benefit from in period revenue recognition noted earlier. M365 consumer products and cloud services revenue increased 5% and 6% in constant currency. M365 consumer cloud revenue increased 6% and 7% in constant currency with continued momentum in M365 consumer subscriptions which grew 10% to 84.4 million. M365 consumer cloud revenue represents 85% of total M365 consumer products and cloud services. LinkedIn revenue increased 10% and 9% in constant currency slightly ahead of expectations with growth across all lines of business. Dynamics revenue grew 14% driven by Dynamics 365 which grew 18% and 19% in constant currency with continued growth across all workloads and continued share gains. As a reminder, Dynamics365 represents about 90% of total Dynamics revenue segment gross margin dollars increased 11% and 12% in constant currency and gross margin percentage decreased slightly year over year. Driven by scaling our AI infrastructure, operating expenses increased 2% and operating income increased 16%. Next, the intelligent cloud segment revenue was $24.1 billion, increasing 20% and 21% in constant currency in line with expectations. Azure and other cloud services revenue grew 33% and 34% in constant currency with healthy consumption trends that were in line with expectations. The better than expected result was due to the small benefit from in period revenue recognition noted earlier. Azure growth included roughly 12 points from AI services similar to last quarter. Demand continues to be higher than our available capacity. Non AI growth trends were also in line with expectations in total and across regions. As customers continued to migrate and modernize on the Azure platform. The non AI point contribution to Azure growth was sequentially lower by approximately 1 point. In our on premises server business, revenue decreased 1% lower than expected. Transactional purchasing ahead of the Windows Server 2025 launch as well as lower purchasing of licenses running in multi cloud environments was mostly offset by the benefit from in period revenue recognition noted earlier. Enterprise and partner services revenue decreased 1% and was relatively unchanged in constant currency segment. Gross margin dollars increased 15% and gross margin percentage decreased 3 points year over year. Driven by scaling our AI infrastructure, operating expenses increased 8% and operating income grew 18% now to more personal computing. Revenue was $13.2 billion increasing 17% with 15 points of net impact from the Activision acquisition. Results were above expectations driven by gaming and search, Windows OEM and devices. Revenue increased 2% year over year as better than expected results in Windows OEM due to mix shift to higher monetizing markets was partially offset by the lower than expected results in devices due to execution challenges. In the commercial segment. Search and news advertising revenue EX TAC increased 18% and 19% in constant currency ahead of expectations primarily due to continued execution improvement. We saw rate expansion in addition to healthy volume growth in both Edge and Bing and in gaming. Revenue increased 43% and 44% in constant currency with 43 points of net impact from the Activision acquisition. Results were ahead of expectation driven by stronger than expected performance in both first and third party content as well as consoles, Xbox content and services revenue increased 61% with 53 points of net impact from the Activision acquisition segment. Gross margin dollars increased 16% and 17% in constant currency with 12 points of net impact from the Activision acquisition. Gross margin percentage was relatively unchanged year over year. Our strong execution on Margin improvement in gaming and search was offset by sales mix shift to those businesses. Operating expenses increased 49% with 51 points from the Activision acquisition. Operating income decreased 4%. Now back to total company results. Capital expenditures including finance leases were $20 billion in line with expectations and cash paid for PP and E was $14.9 billion. Roughly half of our cloud and AI related spend continues to be for long lived assets that will support monetization over the next 15 years and beyond. The remaining cloud and AI spend is primarily for servers, both CPUs and GPUs to serve customers based on demand signals. Cash flow from operations was $34.2 billion up 12% driven by strong cloud billings and collections, partially offset by higher supplier, employee and tech payments. Free cash flow was $19.3 billion down 7% year over year, reflecting higher capital expenditures to support our cloud and AI offerings this quarter. Other income expense was negative $283 million, significantly more favorable than anticipated due to foreign currency remeasurement and net gains on investments. Our losses on investments accounted for under the equity method were as expected. Our effective tax rate was approximately 19% and finally we returned $9 billion to shareholders through dividends and share repurchases. Now moving to our Q2 outlook which unless specifically noted otherwise is on a US dollar basis. First FX with the weaker US dollar and assuming current rates remain stable, we expect FX to increase total revenue and segment level revenue growth by less than 1 point. We expect FX to have no meaningful impact to COGS or operating expense growth. Our outlook has many of the trends we saw in Q1 continue through Q2. Customer demand for our differentiated solutions should drive another quarter of strong growth in commercial bookings. We expect strong growth on a growing expiry base driven by increased long term commitments to our platform and strong execution across core annuity sales motions. 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 signals. As I said last quarter, we will stay aligned and if needed adjust to the demand signals we see. 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. Starting with productivity and business processes, we are the market leader when it comes to knowledge based copilots. Agents in the enterprise space and we are focused on continuing to gain share across our productivity solutions. Therefore, we expect revenue and productivity in business processes to grow between 10 and 11% in constant currency or 28.7 to US$29 billion. M365 commercial cloud revenue growth should be approximately 14% in constant currency with moderating seat growth across customer segments and ARPU growth through E5 and M365 copilot. For H2 we expect revenue growth to remain relatively stable compared to Q2. We continue to see growth in M365 copilot seats and we expect the related revenue to continue to grow gradually over time. For M365 commercial products, we expect revenue to decline in the low single digits. As a reminder, M365 commercial products include on premises components of M365 Suites, so our quarterly revenue growth can have variability primarily from in period revenue recognition depending on the mix of contracts. M365 consumer cloud revenue growth should be in the mid single digits driven by M365 subscriptions. For LinkedIn we expect revenue growth of approximately 10% driven by continued growth across all businesses and in Dynamics 365 we expect revenue growth to be in the mid to high teens driven by continued growth across all workloads. Next Intelligent Cloud Helping our customers transform and grow with innovative cloud and AI solutions is driving continued growth in Azure. Therefore we expect revenue in Intelligent Cloud to grow between 18 and 20% in constant currency or 25.55 to US$25.85 billion. Revenue will continue to be driven by Azure which as a reminder can have quarterly variability primarily from inquiry Revenue Recognition Depending on the mix of contracts in Azure, we expect Q2 revenue growth to be 31 to 32% in constant currency driven by strong demand for our portfolio of services. We expect consumption growth to be stable compared to Q1 and we expect to add more sequential dollars to Azure than any other quarter in history. We expect the contribution from AI services to be similar to last quarter given the continued capacity constraints as well as some capacity that shifted out of Q2 and in H2 we still expect Azure growth to accelerate from H1 as our capital investments create an increase in available AI capacity to serve more of the growing demand. And in our on premises server business we expect revenue to decline in the low to mid single digits on a prior year comparable that benefited from purchasing ahead Of Windows Server 2012 end of support and in enterprise and partner services we expect revenue growth to be in the low single digits. Now to more personal computing. We continue to make decisions to prioritize strategic higher margin opportunities within each of our consumer businesses. Our outlook reflects the improvement in gross and operating margins from this prioritization work. Across gaming, search and devices, we expect revenue and more personal computing to be 13.85 to US$14.25 billion. Windows OEM and devices revenue should decline in the low to mid single digits. We expect Windows OEM revenue growth in line with the PC market to be more than offset by a decline in devices as the trends from Q1 continue. Search and News Advertising ex tech revenue growth should be in the high teens with continued growth in both volume and revenue per search. This will be higher than overall search and news advertising revenue growth which we expect to be in the high single digits. And in gaming we expect revenue to decline in the high single digits due to hardware. We expect Xbox content and services revenue growth to be relatively flat we're excited about last week's launch of Call of Duty, where we saw the most Game Pass subscriber ads we've ever seen on a launch day. There are two things about the launch that are different than the Call of Duty launch a year ago where revenue was mostly recognized in the quarter of purchase. First, the game is available on Game Pass, so for players who play through Game Pass, the subscription revenue is recognized over time. Second, the game requires an online connection to play, so even for players who purchase the standalone game, revenue recognition will also occur ratably over time. Now back to company guidance. We expect COGS to grow between 11 and 13% in constant currency or to be between 21.9 to US$22.1 billion and operating expense to grow approximately 7% in constant currency or to be Between 16.4 and US$16.5 billion. This should result in another quarter of operating margin expansion. Other income and expense is expected to be roughly negative $1.5 billion, primarily driven by our share of the expected loss from OpenAI which is accounted for under the equity method. As a reminder, we do not recognize mark to market gains or losses on equity method investments. As you heard from Satya, our strategic partnership and investment in OpenAI has been pivotal in building and scaling our AI business and positioning us as the leader in the AI platform wave. And lastly, we expect our Q2 effective tax rate to be approximately 19%. In closing, we remain focused on strategically investing in the long term opportunities that we believe drive shareholder value. Monetization from these investments continues to grow and we're excited that only two and a half years in our AI business is on track to surpass $10 billion of annual revenue run rate in Q2. This will be the fastest business in our history to reach this milestone. We are committed to growing this leadership position across our entire Microsoft cloud while maintaining our disciplined focus on cost management and prioritization across every team. With that, let's go to Q and A. Brett.",
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          "text": "Thanks, Amy. We'll now move over to Q and A. Out of respect for others on the call, we request that participants please only ask one question. Operator, can you please repeat your instructions?",
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          "text": "Thank you. Ladies and gentlemen, if you would like to ask a question, please press Star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. And our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.",
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          "start_time": "00:37:18,600",
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          "text": "Excellent. Thank you guys for taking the question and congratulations on a really solid quarter. Satya. The expansion of capabilities, the speed of innovation, the magnitude of the opportunities ahead for generative AI, it makes this the most exciting period for software I've seen in my 25 years of covering this space. And based upon this call, it seems like you share that excitement. But in my investor conversation, that excitement also feeds to relationships and they both have to do with constraints. And the first is like what are the internal constraints or guardrails that Microsoft has when it comes to investing behind these innovations, particularly in relation to the funding of future generations of foundational models where people are talking about price tags, you own tens of billions or even $100 billion plus. And then on the other side of the spectrum, what are the external constraints that Microsoft sees in building out this capacity to meet the demand and capture the opportunity? Particularly constraints in your ability to power all these data center being built out and powered in an environmentally sustainable fashion. I'd love to get the Microsoft perspective on both those questions.",
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          "start_time": "00:38:49,836",
          "end_time": "00:38:51,348",
          "text": "Seeing and then we would then project.",
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          "text": "The demand and that's what we would build for.",
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          "start_time": "00:45:30,830",
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          "text": "The next question comes from the line of Carl Kirsted with ubs. Please proceed.",
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          "start_time": "00:38:54,556",
          "end_time": "00:38:56,516",
          "text": "So you can think of training essentially.",
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          "start_time": "00:38:56,548",
          "end_time": "00:39:00,820",
          "text": "As that which is you're building the next generation model so that then you.",
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          "start_time": "00:57:46,100",
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          "text": "And the last question will come from the line of Rishi Jaloria with rbc. Please proceed.",
          "created_at": "2025-01-08T18:41:13.149987Z",
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          "start_time": "00:39:00,860",
          "end_time": "00:39:02,660",
          "text": "Have a more capable model that then.",
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          "start_time": "00:39:02,700",
          "end_time": "00:39:16,036",
          "text": "Drives more inference demand. Right. So ultimately, even with all the scaling laws and what have you, I think you ultimately will normalize to having a pace. In fact, I think the best way to think about even is given that.",
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          "start_time": "00:39:16,108",
          "end_time": "00:39:19,460",
          "text": "Moore's Law effectively is working on the.",
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          "start_time": "00:39:19,580",
          "end_time": "00:39:22,612",
          "text": "Sort of silicon and system side.",
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          "start_time": "00:43:20,060",
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          "text": "Thanks, Brent. Operator, Next question please.",
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          "start_time": "00:39:22,636",
          "end_time": "00:39:24,884",
          "text": "So it's just not compute, it's efficiencies.",
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          "start_time": "00:39:24,932",
          "end_time": "00:39:27,940",
          "text": "In compute, it's data as well as algorithms.",
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          "text": "You will want to sort of keep.",
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          "start_time": "00:50:11,920",
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          "text": "Thanks, Carl.",
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          "text": "On that curve, which is you really want to refresh your fleet with the Moore's Law every year and then effectively depreciate it over the period of the life cycle of it. And then the inference demand ultimately will govern how much we invest in training because that's, I think at the end of the day you're all subject to ultimately demand. The second piece of the external constraints we have run into obviously lots of external constraints because this demand all showed up pretty fast, right? I mean, if you think about even the most hit products of this generation, all are in our cloud, right? Whether it's ChatGPT, whether it's Copilot, whether it's GitHub, Copilot or even DAX Copilot, I mean, pick the top four or five products of this generation, they're all sort of in and around our ecosystem. And so therefore we ran into a set of constraints which are everything because DCs don't get built overnight. So there is, there's DC, there is power. And so that's sort of been the short term constraint. Even in Q2. For example, some of the demand issues we have or our ability to fulfill demand is because of in fact external third party stuff that we leased moving out.",
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          "start_time": "00:40:42,574",
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          "text": "So that's the constraints we have.",
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          "text": "But in the long run we do need effectively power and we need DCs and some of these things are more long lead. But I feel pretty good that going into the second half of even this fiscal year that some of that supply demand will match up.",
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          "text": "Excellent. Thank you guys.",
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          "text": "Thanks Keith. Operator, Next question please.",
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          "text": "The next question comes from the line of Brent Thill with Jeffries. Please proceed.",
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          "text": "Thanks Amy. Good to hear the re acceleration in the back half for Azure. I guess many are asking 34% growth in Q1 falling to low 30s. I know the comp is a couple points harder, but is there anything else you're contemplating in that guide for Q2 to see that deceleration other than a tougher comp? Thank you.",
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          "text": "Thank you very much, that's very helpful.",
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          "text": "Thanks Mark. Operator, next question please.",
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          "text": "Okay, great, thank you. I'm actually not going to ask a question about the numbers, but Satya and Amy, I'd love to ask a question about OpenAI. Since the print three months ago, we investors have been hit with a torrent of media stories about OpenAI and Microsoft and I'd love to give Microsoft an opportunity to frame the relationship. It seems to me it's critically important. But we have been, I think everyone on the line picking up signals that perhaps Microsoft wants to diversify somewhat at the model layer and offer customers choice. So Satya, I'd love to get your framing of the relationship and then in terms of the numbers, maybe this is a little bit more for you Amy, but how does Microsoft manage the demands on capex from helping OpenAI with its scaling ambitions? And how do you manage the impact on other income that you just gave us some color on? Thank you so much.",
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          "text": "Sure. Thanks Carl. So I'd say first the partnership for both sides, that's OpenAI and Microsoft has been super beneficial. After all, we effectively sponsored what is one of the most highest valued private companies today when we invested in them and really took a bet on them and their innovation four, five years ago that has led to great success for Microsoft, led to great success for OpenAI and we continue to build on it. Right? So we serve them with world class infrastructure on which they do their innovation in terms of models on top of which we innovate on both the model layer with some of the post training stuff we do as well as some of the small models we build and then of course all of the product innovation. One of the things that my own sort of conviction of OpenAI and what they were doing came about when I started seeing something like GitHub Copilot as a product get built or Dax Copilot get built or M365 copilot get built. So we have a fantastic portfolio of innovation that we build on top of that. At the same also I would say we are investors, we feel very, very good about our investment stake in OpenAI and so our focus and we're always in constant dialogue with them. In a partnership like this, when both sides have achieved mutual success at the pace at which we've achieved it, that means we need to kind of push each other to do more to capture the moment and that's what we plan to do and we intend to keep building on it.",
          "created_at": "2025-01-08T18:41:02.828109Z",
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          "text": "And maybe to your other two questions, Carl, listen, I'm thrilled with their success and need for supply from Azure and infrastructure and really what it's meant in terms of being able to also serve other customers. For us, it's important that we continue to invest capital to meet not only their demand signal and needs for compute, but also from our broader customers. That's partially why you've seen us committing the amounts of capital we've seen over the past few quarters is our commitment to both grow together and for us to continue to grow the Azure platform for customers beyond them. And so I don't really think of it as how do you balance it. It's just we have customers who have needs and real use cases and delivering value today and if we can't meet that, we need to work to meet it. And that means working harder and faster to make sure we do that, which is what the team is committed to do. Second piece of your question I think was on the impact other income and not to get too accounting heavy on the earnings phone call, but I would say just a reminder, this is under the equity method, which means we just take our percentage of losses every quarter and those losses of course are capped by the amount of investment we make in total, which we did talk about in the queue this quarter as being $13 billion. And so over time that's just the constraint and it's a bit of a mechanical entry and so I don't really think about managing that. That's the investment and acceleration that OpenAI is making in themselves and we take a percentage of that.",
          "created_at": "2025-01-08T18:41:03.134908Z",
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          "end_time": "00:50:09,352",
          "text": "Got it.",
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          "text": "Okay, very helpful. Thank you both.",
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          "text": "Operator, next question please.",
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          "start_time": "00:50:15,920",
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          "text": "The next question comes from the line of Kash Rangan with Goldman Sachs. Please proceed.",
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          "start_time": "00:50:22,650",
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          "text": "Hi, thank you very much. Sati, when you talked about the investment cycle, these models are getting bigger, more expensive, but you also pointed out to how in the inference phase we're likely to get paid. How does that cycle look like in.",
          "created_at": "2025-01-08T18:41:04.93923Z",
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          "start_time": "00:50:38,282",
          "end_time": "00:50:40,482",
          "text": "And the applications that will show up.",
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          "start_time": "00:50:40,506",
          "end_time": "00:50:42,562",
          "text": "On the Microsoft P and L as.",
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          "start_time": "00:50:44,890",
          "end_time": "00:50:45,870",
          "text": "Thank you very much.",
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          "updated_at": "2025-01-08T18:41:06.25622Z"
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          "start_time": "00:50:42,586",
          "end_time": "00:50:44,850",
          "text": "A result of the inference phase of AI kicking it?",
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          "start_time": "00:52:16,178",
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          "text": "And Kash, maybe just to add a little bit to what Satya is saying, I think a part of his two answers is that what you're saying is this number we're talking about, the $10 billion across inference and our apps is already what that momentum and that investment and that progress and that revenue is what builds the next cycle of training. Right. And so it's that circle as opposed to, oh, we're doing training now and then inference. Much of the training investments that are and that fueled this revenue growth came before and we already funded that work. And so that's an important point.",
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          "start_time": "00:52:59,150",
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          "text": "That's to your point that you invest now and you can get the growth later, even if you slow down the capex.",
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          "start_time": "00:50:47,270",
          "end_time": "00:50:48,046",
          "text": "Thanks, Keshe.",
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          "start_time": "00:50:48,078",
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          "text": "I mean, the good news for us is that we're not waiting for that inference to show up. If you sort of think about the point we even made that this is going to be the fastest growth to.",
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          "start_time": "00:51:02,550",
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          "text": "$10 billion of any business in our.",
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          "start_time": "00:51:12,050",
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          "text": "As evident is that we are.",
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          "text": "Not actually selling raw GPUs for other people to train. In fact, that's sort of a business we turn away because we have so much demand on inference that we are not taking what I would. In fact, there's a huge adverse selection problem today where people it's just a bunch of tech companies still using VC money to buy a bunch of GPUs. We kind of really are not even participating in most of that because we are literally going to the real demand, which is in the enterprise space or our own products like GitHub Copilot or M365 Copilot. So I feel the quality of our revenue is also pretty superior in that context. And that's what gives us even the conviction to even Amy's answers previously about our capital spend is if this was just all about a bunch of people training large models and that was all we got, then that would be ultimately still waiting to your point, for someone to actually have demand which is real. And in our case, the good news here is we have a diversified portfolio. We're seeing real demand across all of that portfolio.",
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          "start_time": "00:53:03,526",
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          "text": "That's what you're trying to tell us.",
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          "start_time": "00:53:06,670",
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          "text": "That's the cycle that is important to understand.",
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          "text": "Got it.",
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          "text": "Thanks. Cash operator. Next question.",
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          "text": "Please.",
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          "text": "The next question comes from the line of Mark Murphy with JP Morgan. Please proceed.",
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          "text": "Thank you very much. I'm wondering if you can shed any more light just on the nature of the supply limitations that you're mentioning that are impacting Azure in Q2, where that impact might be incrementally just a touch more than we expected. Is it more the GPU supply? Is there some element of power cooling or the ability to wire up the networks? Amy, should we infer that the supply is constraining Azure growth by roughly a couple few points in Q2, or am I overestimating that?",
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          "text": "Maybe. To answer both those questions, Mark, very directly, I wouldn't think about it. Component Logic in my Q2 answer, the supply push out, as Satya said, with third parties that are delivering later than we had expected, that gets pushed mainly into the second half of the year and in general Q3. So that third party is where we have tended to buy supply inclusive of kits. So it's complete end to end third party delivery. In terms of the impact, as I was saying, when you think about having flat consumption Q1 to Q2, there really are only two things that impact that difference. And one was the help we got in Q1 from the Revenue and Revenue and accounting help. And then Q2 has been the supply pushout.",
          "created_at": "2025-01-08T18:41:10.132127Z",
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          "start_time": "00:54:59,130",
          "end_time": "00:55:00,110",
          "text": "Thank you.",
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          "text": "Thanks, Mark. Operator, Next question please.",
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          "text": "The next question comes from the line of Ramo Lensho with Barclays. Please proceed.",
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          "start_time": "00:55:10,970",
          "end_time": "00:55:11,394",
          "text": "Perfect.",
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          "text": "Thank you. If you talk about the market at the moment, because you were first at Copilot, you had identified a lot with Copilots and. And now we're talking agents.",
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          "text": "Can you kind of.",
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          "text": "Satya, how do you think about that? To me it looks like an evolution that we're discovering how to kind of productize AI better, etc. So how do you think about that journey between Copilot's agents and maybe what's coming next? Thank you.",
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          "text": "Sure. The system we have built is Copilot, Copilot Studio, agents and autonomous agents. You should think of that as the spectrum of things. Right. So ultimately, the way we think about how this all comes together is you need humans to be able to interface with AI. So the UI layer for AI is Copilot. You can then use Copilot Studio to extend Copilot. For example, you want to connect it to your CRM system, to your office system, to your HR system. You do that through Copilot Studio. By building agents effectively. You also build autonomous agents so you can use even. That's the announcement we made a couple of weeks ago is you can even use Copilot Studio to build autonomous agents. Now, these autonomous agents are working independently, but from time to time they need to raise an exception. So autonomous agents are not fully autonomous because at some point they need to either notify someone or have someone input something. And when they need to do that, they need a UI layer. And that's where, again, it's Copilot. So Copilot. Copilot agents built in Copilot Studio. Autonomous agents built in Copilot Studio. That's the full system, we think, that comes together and we feel very, very good about the positioning. And then of course, we are taking the underlying system services across that entire stack that I just talked about and I'm making it available in Azure. You have the RAW infrastructure, if you want it, you have the model layer independent of it, you have the AI app, server and Azure. AI everything is also a building block service in Azure for you to be able to build. In fact, if you want to build everything that we have built in the Copilot stack, you can build it yourself using the AI platform. So that's sort of, in simple terms, our strategy and that's kind of how it all comes together.",
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          "text": "Okay, perfect.",
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          "text": "Very clear.",
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          "text": "Thanks, Rabo Operator. We have time for one last question.",
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          "text": "Oh, wonderful. Thanks. Hi, Satya Hami. I appreciate the question. I want to go and think a little bit about Copilot, how we should be thinking about kind of numbers here with the recategorization. Seems like that was maybe softer in the past than expected or maybe with the numbers this quarter starting to pick up, can you maybe walk us through what you're seeing on that and maybe more importantly, how we should be thinking about your overall strategy on consumer versus enterprise, especially now with Mustafa on the pole. Thanks so much.",
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          "text": "Yeah.",
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          "text": "On the first part, Rishi, to your question. I think we feel very good about the momentum we have in the commercial Copilot, as I said in my remarks and Amy talked about, this is the fastest growth of a new suite in M365. If I compare it to what we saw even way back in E3 or E5 or the transition from O to M, this is really much faster. It's the numbers of penetration of the Fortune 500 and then the fact that they're coming back for more seats and what have you. So it's very strong in that context.",
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          "text": "The other thing I'll also mention is.",
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          "text": "That we want this to be something that is systemic because people need to be able to put the security controls.",
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          "text": "Then they need to deploy, then there's.",
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          "text": "Killing and then there's change management. So this is not like you just, it's not a tool like when I talk about copilot, Copilot Studio Agents. It's really as much about a new way to work. And sometimes I describe it as what happened throughout the 90s with PC penetration. After all, if you take a business process like forecasting, what was it like pre email and Excel and post email and Excel, that's the type of change that you see with copilot. But overall we feel great about the rate of progress and the penetration. And then on the consumer side look for us the exciting part here is to be able to use the same investment we are making in the commercial where we have structural strength and then.",
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          "text": "Be on the offense.",
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          "text": "One of the things that I think, I hope you all catch in our earnings is xtac, our revenue when it comes to what we describe as search, news and ads is growing faster than market. So that's, you know, it's fantastic to see that. And you know, so that's kind of a consumer business which you know, in Microsoft's large scope, you know, it's sort of even a ten plus billion dollar business sort of sometimes goes missing. But in our case it is actually a fantastic growth business that's growing faster than market. We feel good about how we will use AI in LinkedIn. In fact, LinkedIn is a consumer business business as you know, you saw even today, this week they announced some new capabilities for both consumers and in their case even recruiting. So we think that AI, the same investment gets monetized even through LinkedIn's innovation. And gaming of course is another place where you'll see some of these things apply. And Windows. So the place where I think I'm excited about is copilot plus PCs. For us it's not about having a disconnected edge, it's about having hybrid AI where the rebirth of sort of the PC as the edge of AI is going to be one of the most exciting things for developers. So we feel well positioned quite frankly with the same investment. So that's the thing, we're not a conglomerate here. We are sort of one company. That means we invest once and then we have all these categories that benefit from that. And that's the theory of the firm here for us. And so we feel good about all of that coming together and maybe just.",
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          "text": "To add one piece because I think.",
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          "text": "Rishi, now that I'm listening and thinking.",
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          "text": "Through the question, it feels like you're wondering why am I not seeing the copilot if you've made all this progress in the results and the answer is you already are in that M465 commercial number, we've seen that seat growth. But those seats that we're adding, the majority of them are driven by frontline worker and small businesses. Those have a lower ARPU point. And so it masks some of the ARPU that we're already seeing, not just from E5, which continues to contribute, but also this quarter additional impact from copilot. So as we go forward, because being able, that is where you're going to see the impact will be in ARPU in M365 commercial. And as Satya said, I think you'll see the impact of copilot engagement frankly across the same XTAC number.",
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          "text": "Wonderful.",
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          "text": "Thank you.",
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          "text": "Thanks, Rishi. That wraps up the Q and A portion of today's earnings call. Thank you for joining us today and we look forward to speaking with all of you again soon.",
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          "text": "Thank you. This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.",
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  {
    "call_id": "Walmart Q3 25",
    "call_title": "Walmart Q3 25 Conference Call",
    "symbol": "Walmart Q3 25",
    "start_time": "2025-01-08T18:40:48Z",
    "end_time": "2025-01-08T18:41:14Z",
    "duration": 0,
    "status": "COMPLETED",
    "created_at": "2025-01-08T18:40:48.77592Z",
    "updated_at": "2025-01-08T18:41:14.097082Z",
    "transcripts": {
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      "call_id": "Walmart Q3 25",
      "text": " Greetings and welcome to the Walmart third quarter fiscal year 2025 earnings call. @ this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Steph Whitting, Senior Vice President of Investor Relations. Thank you. You may begin. Thank you. Welcome everyone. We appreciate you joining us and your interest in Walmart. Joining me today from our home office in Bentonville are Walmart CEO Doug McMillan and CFO John David Rainey. Doug and John David will first share their views on the quarter and then we'll open up the line for your questions. During the question and answer portion, we will be joined by our segment CEOs John Furner from Walmart US, Cath Maclay from Walmart International, and Chris Nicholas from Sam's Club. For additional detail on our results, including highlights by segment, please see our earnings release and accompanying presentation on our website. We will make every effort to answer as many of your questions as we can in the hour we have scheduled for this call. As a courtesy to others, please limit yourself to one question. Today's call is being recorded and management may make forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the sec. Please review our press release and accompanying slide presentation for a cautionary statement regarding forward looking statements as well as our entire safe harbor and non GAAP reconciliations on our website@stock.walmart.com Doug that concludes my intro. We're ready to begin. Good morning and thanks for joining us. Our associates delivered another strong quarter, continuing our momentum. They're working hard to save our customers and members time and money while simultaneously transforming our business for the future. For the quarter, sales grew 6.1% in constant currency and profit was up 9.8%. Globally, we drove strong growth in e commerce up 27%, advertising grew 28% and membership income was up 22%. This helped us grow profits faster than sales. Even as we work to help lower prices and invest in our associates. The rapid growth from these newer businesses is helping us strengthen our business model. All three segments of our business performed well. Sales for Walmart International grew 12.4% in constant currency. Comp sales for Sam's Club US were 7% and Walmart US delivered comp sales of 5.3%. Transaction counts and unit volumes were positive across each segment and we continued to gain market share in the US Both in grocery and general merchandise. Households earning more than $100,000 made up 75% of our share gains in the US in store volumes grew, curbside, pickup grew faster and delivery sales grew even faster than that. Becoming more convenient for our customers and members is helping drive our growth. We had almost no like for like inflation in the US this quarter. It was nice to see general merchandise grow low single digits in the US even as prices are deflated by over 4%. We currently have about 6,000 rollbacks in. Walmart US across all categories. We're feeling some margin pressure from growth in GLP1 drugs, so we're pleased to see general merchandise sales be positive across the company. Inventory is in very good shape. The unique characteristics of this quarter included a US Port strike, two large hurricanes, and the flooding they caused. Our team did a really nice job preparing before those events and they worked hard to aid recovery after the storms. The team that comes together from across the company to form our emergency operations center is impressive. They coordinate closely with federal, state and local leaders. They make sure our associates are accounted for and safe and we set up distribution points at stores in the affected areas where we serve hot meals, give away supplies, offer showers, laundry services and phone charging. Through Walmart and the Walmart foundation. We made a $16 million commitment which we've delivered on. This includes 178 truckloads of needed supplies and cash grants totaling nearly $10 million to support our truck drivers and other associates helped facilitate or serve 544,000 meals in the affected areas supported by our non profit partners. Our customers and members contributed an additional $14.5 million from in store and online campaigns. I got a chance to see our associates in action in Georgia and here in Bentonville and I couldn't be prouder of them all. In total, the storms in the port strike lifted our sales growth by a small amount and negatively affected operating income growth by a larger amount. The takeaway should be that we delivered on our financial framework despite the noise from these events. This was clearly a strong quarter and the changes we've been working on for years are continuing to bear fruit. We're well positioned to serve people how they want to be served, whether that's coming into a store, picking up an order or having it delivered. Our team has changed, developed new capabilities and learned how to work in new ways. We build new tech more effectively than we used to and we're doing it with more speed. This is a more customer and member centric organization. I got to attend our Sam's Club grand opening in Grapevine, Texas a few weeks ago and it was exciting to be there. We made quite a few changes to the design of this club. We have an expanded area for curbside pickup and delivery orders, new category adjacencies with consumables near the pickup and delivery staging area and a stronger general merchandise presentation that has improved the sales mix of those categories. Boldly, our SAMS team also eliminated traditional checkouts so our members can use Scan and Go and the new Computer Vision Exit technology to exit the club faster. Just imagine a 150,000 square foot Sam's Club with no traditional checkouts. The week after that grand opening in Texas, I made a trip to China. The week before I arrived we opened our 50th Sam's Club there with 60,000 members. All 50 clubs are performing well and we have more to come. About half our sales in China are digital, thanks in part to our network of over 350 club distribution points which provide one hour delivery service to members, extending the reach of our traditional clubs. We've learned a lot from operating around the world and we continue to learn from places like China where social commerce including live streaming are growing quickly in places like India where financial services have digitized at scale. Last week I got to spend a couple of days with our team in Mexico where our team is driving innovation in lots of areas including with our cellular service bite, our financial services business Kashi, and with Healthcare Services where We've helped over 400,000 customers visit a doctor in our in store Healthcare clin. As in other markets, our walmax team is growing E commerce, adding newer businesses including marketplace and advertising and becoming an omnichannel retailer. As I mentioned last quarter, we're seeing early tangible results from the deployment of generative AI. I'm a little hesitant to talk about AI because I know someone will hear this in the months and years to come and chuckle about how old school it sounds given how fast things are changing. But it's important to convey that we're learning and applying generative AI, AI and machine learning to solve the practical opportunities right in front of us. Our data sets are valuable and we're learning to put them to work to improve the customer member experience and assist our associates as they do their daily work. I'll build on the example I shared last quarter about how Genai has helped us improve our product catalog by mentioning the Personal Shopping Assistant we're building. We've had it in beta form for five months and it continues to improve. I'm excited about how it will improve the customer experience in the months and years to come, enabling us to provide a better experience than the one that starts by typing into a search bar and getting a list of results to choose from. We're racing to improve all the things that people love about shopping and remove or diminish all the things they don't in addition to the customer facing work 15 months ago we deployed a Genai tool to all of our US Home office associates. It's called My Assistant. We've expanded access to Home office associates in 13 additional countries and we continue to see engagement grow. It provides our associates a place to access knowledge and time saving actions in a secure environment. Since launch, 50,000 associates have used my assistant to ask 1.5 million questions. Our leaders can get insights into people related metrics such as hiring and retention and associates can get answers to common policy questions like how do I order my discount card? Through a conversational experience. We'll continue to build on these use cases to enable more productivity and help identify the next best task for our associates in stores and clubs. Just as we're enhancing the customer experience with Genai, we're working to remove friction for our associates so they can do high value work that they enjoy like serving our customers and being merchants. I continue to be excited about how our associates are learning and changing the way they think and work. With that, I'll wrap up and turn it over to our CFO whose Baylor Bears beat my Arkansas Razorbacks in basketball recently. We'll see you in March, John David. Well, we look forward to that Doug. I hope the Razorbacks have a good season, just not as good as the Bears. I want to start by thanking our team for delivering another strong quarter. We're encouraged by the steady momentum building across the business. Importantly, the drivers of our outperformance are similar to the past several quarters, with customers and members continuing to respond to our value proposition. As we provide lower prices and greater levels of convenience, we're broadening our assortment, improving customer experience and earning their trust while seeing share gains as a result. We're also realizing benefits from the investments we've made in our core Omni retail business and seeing improved profitability with newer businesses. We're executing on our strategy and the business model is delivering as it's designed to do, with operating income growing faster than sales and yet there is much more opportunity ahead. As Doug noted The hurricanes that impacted the southeastern United States resulted in unanticipated expenses during the quarter. I'm incredibly proud of how our team responded to support the communities that we serve, using our fleet of semi trucks, supply chain logistics capabilities, product inventory and financial resources to support the restoration effort. At the peak of the storms, we had about 400 stores, clubs and DCs closed. We're pleased that all of our associates in the affected areas remain safe and we continue to support them during this disruptive period. We've since reopened all of our super centers except for two that were extensively damaged, and we're in the process of restoring these stores to serve customers again as soon as possible. Now let me review the highlights of our financial results. Q3 sales, operating income and EPS all exceeded the top end of our guided ranges. Enterprise net sales growth was over 6% on a constant currency basis with all three operating segments outperforming our expectations aided by strong E commerce growth. Walmart US comp sales increased 5.3% including e commerce sales growth of 22%, growth in customer transactions and units across stores and E Commerce remains strong. Store fulfilled Delivery increased nearly 50% and surpassed $2.5 billion monthly run rate. We've now had 12 consecutive months of deliveries above $2 billion. Food categories were especially strong this quarter with unit volumes growing by the highest level in four years. We also generated mid teens growth in health and wellness due largely to branded pharmacy scripts including GLP1. GLP1 sales contributed about 1 point to the segment comp while continuing to create mix pressures in gross profit. We're encouraged by the improvement in general merchandise where we had low single digit comp sales growth including strength in home, hardline and toys. US customers remain resilient with behaviors largely consistent over the past four to six quarters. They continue to seek value to maximize their budgets while also choosing convenient options to save time. Our efforts to bring down pricing have helped as total like for like inflation has remained close to flat for the past four quarters with Q3 general merchandise and consumables deflationary and food inflationary in the low single digits. We're seeing higher engagement across income cohorts with upper income households continuing to account for the majority of our share gains. Our international business had another strong quarter with constant currency sales growth of 12.4% reflecting strength in Flipkart, Walmex and China. We saw positive unit growth across markets with sales strength in both general merchandise and food and consumables. E Commerce sales increased 43% and penetration grew across all markets, with speed of delivery becoming increasingly important to customers. In the last 12 months, International delivered over 2.1 billion items same day or next day, with about 45% of those delivered in under one hour. Flipkart's BBD or Big Billion Day sales event was up double digits in both top line and customer growth. The timing of the event was earlier than last year, benefiting our year over year sales comparisons in Q3 with the corresponding headwind expected in Q4. WALMEC's growth outpaced the comparable market for the sixth consecutive quarter and our business in China continued to grow double digits with strength in Sam's Club and E Commerce. Fompay also had a good quarter with monthly transactions surpassing 8.7 billion and total annualized payment volume of approximately $1.6 trillion. Sam's Club US comp sales ex fuel increased 7% including e commerce growth of 26%, with increased transactions and unit volumes accounting for almost the entirety of the comp growth. In response to member feedback, Sam's rolled out new perks in August like express delivery and the elimination of curbside pickup fees for club tier members which helped E Commerce growth. Since that launch, E Commerce growth has increased by more than 700 basis points versus our trends in the first half of the year with club fulfilled delivery more than doubling in that period. The convenience Sams provides both inside the club and via E Commerce is a differentiator in the warehouse club channel Scan and go. Penetration of sales increased more than 250 basis points and the nearly completed rollout of our JESCO exit technology across all 600 clubs is enabling about 70% of members to exit without a check. Members love it. With member satisfaction scores on exit now close to 90, our frictionless approach to serving members by leveraging technology is on full display at our new club opened in Grapevine, Texas, the first of 30 new clubs we expect to open in the coming years. If you're in the area, we'd encourage you to check it out from a margin standpoint. Consolidated Gross margin expanded 21 basis points led by Walmart U.S. with international results pressured by the timing of Flipkart's BBD sales event in the U.S. improved margins reflected strong inventory management again this quarter with a 0.6% decline on more than 5% sales growth as well as a lower level of markdowns that has allowed us to manage pricing aligned to competitive price gaps. Providing everyday low prices for our customers and members remains a priority and we continue to lower prices in the US across our assortment of national brands and private brands. During the quarter, we had price rollbacks on approximately 6,000 items across our assortment, including around 3,000 items in grocery, and have converted nearly 2,000 price rollbacks over the past year to long term price reductions. We're pleased with how customers and members are responding to our strong value proposition. As our business model evolves, it's encouraging to see our margins improve from a diverse set of offerings. Global E commerce losses continued to narrow in Q3, most notably in Walmart US. While improved business mix helped, we're seeing good progress in core E commerce margins. There are a few key factors driving this delivery densification, increased penetration of paid expedited delivery orders and the automation of our supply chain. As we scale our store fulfilled delivery business and expand our catchment areas, we've seen significant improvement in batch density with orders per delivery up 20%. In addition, the popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than one hour or less than three hours. And lastly, we continue to make progress in the automation of our supply chain as now more than 50% of our fulfillment center volume is automated, which is twice as much at this point last year. This has the obvious benefit of lowering the per unit cost of delivery. These factors Contributed to the third consecutive quarter of approximately 40% reduction in US net delivery cost per order. Importantly, while we drive greater efficiency, we're enhancing service levels with customer NPS for delivery reaching all time highs this quarter. We're also continuing to reshape our profit composition and business mix as we scale growth drivers such as advertising membership, marketplace and fulfillment and data analytics and insights. Our global advertising business increased 28% in Q3 driven by 50% growth in international led by Flipkart which was aided by the BBD event as well as another strong quarter from Walmart connect in the US which grew 26%. We're building a highly unique retail media platform and have been encouraged by ongoing tests showing customer receptivity to growth in digital ads, especially where ads help customers discover relevant items that are trending, navigate and compare choices and enjoy Walmart's everyday low prices. We're also pleased with the trends in our membership programs in the U.S. sam's Club continued to grow membership count and increase its penetration of plus members resulting in 15% membership income growth while Walmart plus membership income grew double digits again this quarter. Within international membership income in China from our Sam's Club business grew more than 30% as member counts continue to increase for Marketplace and Walmart fulfillment services in the US marketplace grew 42% in Q3 and we've now seen more than 30% growth in each of the past five quarters. The number of sellers on the platform continued to grow double digits and SKU count is approaching 700 million items. With a broader assortment of the brands and items customers want. Marketplace sales in beauty, toys, hardlines and home all grew more than 20%. We continue to leverage our next generation supply chain and technology to provide fulfillment for sellers at some of the lowest rates in the industry. As a result, more sellers are using our marketplace fulfillment services, with WFS sales penetration reaching record highs at more than 40%. Outside of the US we're seeing similar encouraging trends. For example, our marketplaces in Mexico, Canada and Chile combined increased items by 20% versus last year. In Mexico, the number of items delivered through WFS grew over 50%. And during Flipkart's big Billion Days event we experienced same day delivery growth two and a half times higher than last year. This quarter, Flipkart also launched its quick commerce service called Flipkart Minutes in a number of cities, offering Delivery in under 15 minutes for a variety of items including groceries and electronics. And within data analytics and insights, Walmart Data Ventures continues to grow rapidly with net sales up double digits. Our client base has more than doubled over the past year and we're excited about continuing to broaden our reach to new markets by launching the platform in Canada this month. As a reminder, the margin gains we've reported this year in the US have been burdened by meaningful product headwinds from the outsized sales growth in health and wellness relative to general merchandise. Our plan calls for general merchandise to improve in future quarters, but to continue to underperform health and wellness in grocery until we return to more normalized purchasing cycle across GM categories, we remain focused on building out our marketplace assortment and emphasizing early emergent categories like apparel, home decor and automotive supplies. We're continuing to optimize our business to deliver greater efficiency and we're committed to balancing ongoing investments with improved returns for customers, associates and shareholders. Our evolving business model with more diversified and durable sources of profit has provided the ability to fund investments while also delivering on our financial framework of operating income growing faster than sales. Price gaps remain healthy and we continue to advocate on behalf of customers for lower prices, wrapping up Q3 results. Consolidated operating income grew 9.8% in constant currency and adjusted EPS increased nearly 14% to 58 cents per share. Now turning to guidance, we are raising our full year Guidance to reflect strong third quarter results on a constant currency basis, we now expect full year sales growth of 4.8 to 5.1% and operating income growth of 8.5 to 9.25% versus prior guidance of growth of 3.75 to 4.75% and 6.5 to 8% respectively. Compared to our guidance that we provided at the start of the year, we now expect operating income to grow nearly 400 basis points more at the midpoint. Adjusted EPS is expected to be between $2.42 and $2.47 versus prior guidance of $2.35 to $2.43 this full year guidance implies fourth quarter constant currency growth in sales of around 3 to 4% and operating income around 5 to 7.5%. This guidance is slightly above our prior implied Q4 range and contemplates a series of wage investments that Sam's Club announced on September 17th to be effective in Q4. Recall that we guide sales and operating income growth on a constant currency basis. Currency fluctuations impacted the business negatively in Q3 after being a tailwind in Q1 and neutral in Q2. In Q3, currency pressured reported sales and operating income growth by about 70 basis points and 160 basis points, respectively. If rates stay where they are currently, we would expect a headwind to Q4 reported sales and operating income growth of approximately 100 basis points and 200 basis points respectively. In closing, while we still have one more quarter to go before we close out this year, we're really encouraged by our operational and financial performance. We have a lot of conviction in our strategy and the leaders sitting around the table with me today, along with our team of over 2 million associates around the world, are executing on it. Hopefully you share my sentiment and are as excited as we are to see what else is to come. We appreciate your interest in Walmart and are now ready to take your questions. Thank you. If you'd like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using space speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. As a reminder, we ask that you each keep to one question. Thank you. Our first question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question. Hi, Good morning. Thank you for taking our question. We wanted to focus our question today on general merchandise and Gross margins. While general merchandise inflected positive in the. Quarter, it still seems like mix is. A headwind based on everything you walked through today. Do you have a view on when this gets more balanced? And if we were to see a more balanced growth rate in general merch. Versus consumables and the growth of the alternative revenue businesses, what could gross margin expansion look like? Hey Kate, this is Doug as it. Relates to general merchandise. I'll go first and then ask all three of the segment leaders to speak. We love general merchandise first party, being a first party merchant, something that we obviously grew up doing. When you go into our stores and clubs right now, the seasonal impact of GM is exciting and energizing and so this is something that we're passionate about. And in today's world we can grow first party general merchandise in stores, in clubs plus through E commerce with both pickup and delivery and the expansion of the marketplace. So I think we've got a lot of opportunity. Kind of big picture from a GM point of view. John, why don't you go first and then Chris and Kath can chime in. Sure. Good morning Kate. Thanks for the question. As Doug said, we're excited about the season. We're excited about seasonal merchandising. I've been stores just the last couple months in Utah, California, last week, Philadelphia, Tennessee. List goes on and on and the stores are ready. They're really set for the season. We had a good back to school, we had a good Halloween and it's important to string these holidays together so we go into the season with momentum. We're excited about that and we think we have a great plan for the season. It's early November so the team will be working on consistent execution the next couple months to deliver the best quarter we can for our customers. As we said, general merchandise has improved. We are still experiencing some deflation in general merchandise. This is in the low to mid single digits range. That hasn't changed for some time. But we were positive in comp due to growth in units primarily coming out of, as we said earlier, home toys, some of our hard lines categories. We're seeing some real bright spots as well in the marketplace with fashion and apparel. Really excited about the mix. We have a lot of ways that we can deliver to the customers whether it's in the store, which really excited again as I said about the stores being set seasonally and with our E commerce business growing at 22% in the quarter, that puts us in a spot with some momentum as we enter the fourth quarter. Maybe Chris Go to you at Sam's. Yeah, thanks John. I mean, just a lot of similarity there with us. We love general merchandise. We get very excited about items. And if you think about the way that we've constructed all of our strategic priorities, this is not just a consumables and food game. It's a, is definitely a GM game. If you think about increasing digital engagement, the growth in E Commerce that helps people see the great items we've got then investing in the value proposition, we're investing in a grapevine and Doug talked about it in his opening remarks. We've put a lot of effort into how we merchandise both the items you can buy in club but also the items that you can buy online in this online to offline connectivity. And it's really powerful. And we're seeing significant increases in the participation of general merchandise in that club, which I think is the best articulation of our strategy physically that we have today. There's a couple of other things I'd say from a comp point of view. We're really happy to see the second quarter of positive comps on gm but units are still moving ahead of comps, so there's still good value out there. And similar to John, like in home tech, toys, seasonal decor, all doing really well. And back to college and Halloween were also really strong. So we see that momentum continuing. Yeah. And I say from an international perspective, we saw strong growth in GM in Mexico, India and China and not surprisingly in those markets too. Convenience is really important. And so as we kind of are growing our strength in delivery from the same day and also within the hour, we're seeing the GM growth continue to kind of correlate with that convenience play. I think to drive GM growth over the next few years, E Commerce becomes crucial. Obviously we've seen good growth there recently, but we got a lot more opportunity. And this week when we were in Mexico last week, we saw a pop up toy shop outside of one of our stores that is just dominant in the toy category. It looks gorgeous, fun to shop, kids love it. We just have such an opportunity in the physical world as well as in the digital world to create excitement with general merchandise. Thank you. Our next question comes from the line of Michael Lasser with ubs. Please proceed with your question. Good morning. Thank you so much for taking my question. What is Walmart finding out about its ability to drive steady growth in the core business while reinvesting back in areas like price and wages to lay the foundation for the future? And as the company generates more evidence of the growth of the emerging alternative revenue stream. Does it make sense to invest even more in these areas or are there diminishing returns such that the overall enterprise wide profit growth can accelerate next year and beyond even as you make sizable investments back in the business? Thank you so much. Yeah, thanks, Michael. This is a real time conversation that we have all the time. Are we investing the right amount back? You called out prices and wages. I think those are the two areas that would come to the top of our list too. We think we are investing the right amounts, obviously, but it is a fluid situation. We watch price gaps, we watch what's happening in the employment market and have freedom now to be able to make different investments if we want to. So I think from a kind of an income statement point of view, I feel like we're being appropriately aggressive. And on the capital side, you know that we've made some significant decisions over the last few years to invest in automation in the supply chain, for example, but we're also being, I think, very aggressive as it relates to store and club remodels. So I feel like on the capital side, we're also being aggressive. And as we do that, because of the way that we've set ourselves up, we can grow profit faster than sales and do those things at the same time. It's just a matter of degree and we will manage that as we go from week to week. Yeah, Michael, I would add to Doug's point that we feel like we're striking the right balance between profit, expansion and investment in the business. We're all very focused on making sure that we are healthy for the next generation. We certainly provide an outlook over the next three to five years, but we want to continue to have the same type of financial performance after that. And that requires a level of investment in the business. And as Doug said, we feel like we're striking that balance appropriately. In terms of your part of the question about our ability to maybe accelerate profits into the future, look, we're comfortable with the outlook that we provided where we said that the way to think about our financial architecture over the next several years is that operating income will grow faster than sales and sales should on average be about 4%. Some years will be a little better, some years may be a little bit worse. We've had two years now since we provided that outlook. And if you look at our performance last year and our performance year to date, along with our guidance this year, that would suggest that on the top line, we've grown about 5% and grown profits about 10%. We're really pleased about that. But that is not a matter of us being overly conservative or conservative or anything like that. It's really, excuse me, it's really a matter of execution by the team sitting around this table. With anything that we do with any strategy that we have, there's a always going to be things where you areas where you overperform and underperform. But what you've seen is this team has done a really good job at executing on the basics and also our newer, faster growing businesses. And so that's reflected in our financial performance. And if we execute better into the future, yeah, perhaps profits could grow faster. But the financial architecture that we've laid out is still what we believe today. Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question. Good morning. Hi, everyone. I wanted to talk about the top line, which it looks like it accelerated. Q3 versus Q2. The underlying run rate. There were some storms, and I know we mentioned port strikes. Can you talk about the underlying inflection you're seeing? What do we attribute it to? I don't know if it's merchandising, marketplace membership, all the above. And have we inflected? Does it feel like we've inflected to a higher growth rate? Thank you. To me, it feels like it's pretty consistent. If you look at what happened in the first three quarters and the underlying rate, and then you look at what happened in this most recent quarter with the storms, things did increase a bit, but I still feel like we're kind of running the same level of momentum and the same economy. The fourth quarter will be fun to watch. The calendar is not our favorite, with fewer days between Thanksgiving and Christmas. And I suspect when all that's said and done, it will be similar to the kind of momentum that we've seen in the first three quarters. Yeah, Simeon, I'd add that it does feel very consistent to us. The one exception to that is maybe the timing of the big billion days event. As you know, that can fall into the third quarter. Some years, fourth quarter, other years goes back and forth. Because of the way it fell. This year, it added about 60 basis points of growth to the top line for us in 3Q. It also will work against us in 4Q. But other than that, which is just a timing element, the business is performing very consistently, as Doug said. Thank you. Our next question comes from the line of Christopher Horbers with JP Morgan. Please proceed with your question. Thanks. Good morning, everybody. Can you Speak to the changes in the 4Q operating income guide relative to where you started the year at the FX change, to what extent did you change the top line outlook overall and in the us Then he called out Sam's wage investment. But was there any changes in your expectation around gross margin given what you're seeing in the alternate profit pools? And you know 4Q is a big spike in terms of volume. So could that tilt the U.S. e commerce business to profitability? Thank you Chair Powell. I'll address this and others may want to join in. Chris, the way to probably characterize this, if you look at our guidance last quarter versus what's implied this quarter, there's a modest improvement in 4Q performance. There's not been a lot of change before that. In terms of Our outlook for 4Q. The business has been performing, as we've said, pretty consistent in terms of gm. Maybe one thing that has improved and been a little bit better than what we expected at the beginning of the year. And by gm, I'm talking gross margin is shrink. Shrink has performed a little bit better in the US and Sam segment for the first part of the year here. But other than that, the business is continuing to perform very consistently with prior quarters. Some of the more digital businesses, the newer businesses that we have did inflect a little bit higher in 3Q I think also keep in mind that that's a function of the movement of big billion days that I just mentioned. But if you just go the list you look at as an enterprise, 28% advertising growth, 42% marketplace growth, 22% membership income growth like we we are executing our value proposition is resonating with customers and that's why you're seeing us gain. Share as it relates to profitability in E Commerce. We don't think we should race to it. This is a long term game. The 1P 3Pmix is one dimension to manage, for example, and if we should carry more first party items and that somehow delays crossing a threshold of profitability, we're good with that because that's what customers want. That's what will drive growth. If investments in delivery speed cause us to reach profitability a little later, that's fine too. We want to deliver faster. I think we're very confident that we're going to make money in E Commerce. Whether that happens today, tomorrow, or a week from now, or a month from now, a quarter from now, I don't really care. The total works and we've got a great opportunity to grow our E Commerce business. I'm leaning long term. And at some point we'll tell you guys we made money in E Commerce and then just move on and not have that conversation anymore. And as we've said several times, when. You look at the shape of the new income statement and you split it between the original income statement that looks like a store P and L and the new income statement that's got membership, advertising, fulfillment services, data, monetization, maybe some other things in it, it's more profitable. It just took a period of investment. For us to get there. So again, we'll grow profit faster than sales. E Commerce will be part of the mix. Omni is our life, which we love. We think it's an advantage position and we look forward to someday telling you that we made money in E Commerce globally as it obviously varies by country as well. Thank you. Our next question comes from the line of Robbie Ohms with Bank of America. Please proceed with your question. Good morning. Thanks for taking my question, Doug. This may be for you. I get a lot of questions on the share gains with upper income consumers. You guys keep talking about. I was hoping you could sort of. Talk about it across three dimensions. You know, grocery versus general merchandise with. That upper income consumer price driving that versus convenience with that consumer, and then sort of stores versus this huge marketplace. Growth in terms of driving the upper income consumer. Yeah, Robbie, I'll go first, but I'll invite John or others to chime in here too. It is an all of the above answer. We want to sell grocery ngm. And if you go through and look at by category, by income level, it kind of plays out the same way general merchandise does in that people come to us to shop as a primary destination in many instances, and then they give us feedback across categories. And if you look at our offer in food and consumables, our shares are pretty high and consistent relative to some of the things we see in general merchandise. Over the years, we had a really strong market share in categories like toys, bicycles, but we had a lower market share in a lot of the fashion categories. That's basically just the customer telling us over the years, I'd rather buy my apparel somewhere else. But in an Omni world, we have an opportunity with brands, we have an opportunity with presentation to increase the amount of market share we have in some of those categories where we should have had a higher share all along. And that E Commerce opportunity is kind of bearing out. As we grow our assortment, we're able to appeal to more people and appeal to higher income levels. When I think about it from a category point of view, the themes look the same to me. We have more opportunity in fashion areas than we do in basic areas and that's always been true as it relates to price versus convenience. Everybody wants to save money and everybody wants to save time, but it's a continuum. And those that have more discretionary income and want to save time are liking what we're doing with both pickup and delivery. I think that's one of the things that makes this moment in time different. We do get the question from time to time about whether this is sustainable. I look at what's happened with Walmart plus and the relationship you get through a membership, what's happened with our remodels, what's happened with convenience and it gives me more optimism that this is something that's going to last a long time. And it was a different inflection point. Did I leave anything, John, for you to add? Well, those. Sorry, right on. I'll just add a couple things to that. Doug. I think you covered a lot of it. But Robby, we do get the question from time to time and we talk about the different ways that we can serve consumers and how that's different from say a decade ago or even five years ago as we've become Omni, we have the ability to sell customers in the store at the curb delivered to their home and we can do that whenever they want and in many cases however they want. You heard earlier the number of orders that are sub three hours and people are prioritizing time and price. So one of your questions is it's not an or. We want to be a great price and we want to be convenient and we can do both at the same time. The expansion in delivery catchments, the expansion with delivery, delivery, delivery density and the hours of operation have helped us lower our costs which enable us to serve customers more flexibly. So we can do both of those at the same time. In categories like grocery, yes, price obviously matters and so does quality. We do see and as we noted earlier, a large percentage of our market share gains came from higher income customers. That has been happening for several quarters and we see categories like gluten free and dry grocery or grass fed beef organic produce where our share in pickup and delivery is much higher and the mix is higher than in store. So we can be a great opening price point value in the store and we can sell high quality and we can deliver it the way that the customers want. And then last thing is, as Doug did mention, this expansion in E Commerce. Congrats the team for another quarter with momentum at 22% growth. Leading that growth is our marketplace team and our marketplace business, which just tells you that our customers are looking for more of an assortment than they've had in the years prior to this one from Wal Mart. And we're seeing bright spots in apparel, in toys, in healthy food. So it's, it's across the board. We have a lot of work left to do. Our assortment is growing. We think that will continue to happen over the next couple years. But it's great to see the momentum across so many channels. Maybe just to just push in from a sam's point of view. You know, whilst we serve all income cohorts, we do definitely skew higher than the core of Walmart. And what I would say is that they love price more than anybody. Like price is a core competitive advantage of ours, but great items and great prices we think isn't enough. And so you're seeing an acceleration in all of the metrics in SAMs because we're also leaning into experience and a big part of that is convenience. And we're really excited to see the impact of that. That. Thank you. Our next question comes from the line of Christina Katai with Deutsche Bank. Please proceed with your question. Hi, good morning, Doug and John. David. I wanted to dig into the strength of E Commerce a little bit. I was curious if you could talk about what you think is a sustainable level of growth on a go forward basis. Clearly it's a much larger business but you have a lot more that are driving it as well. Whether we think about marketplace and membership, how do you see the rapid expansion of Marketplace sellers and SKUs contribute to both E Commerce growth and as we think about improving the profitability over the next several quarters. And as part of that, can you talk about general merchandise performance, what you saw both in stores and in the marketplace and then just from an assortment perspective as we think about newness and innovation that you called out, just what specifically are you excited most about? Holiday. Thank you. Is that all, Christina? I'm excited about this year. Not only the great items we have, but the convenience that we're going to provide. And I think you could just take our E Commerce growth rate over the last, I don't know, eight quarters and look at the trend line and you can expect that we're going to continue investing to create a better customer experience to result in more growth. We have a relatively low market share in E Commerce versus brick and mortar and that's our opportunity. I think all the investments we're putting in place, including supply chain automation, are aimed at capturing that opportunity. There's such a nice connection between these businesses. As you grow E commerce first party, for example, you get the opportunity to grow third party. As you grow first and third party E commerce businesses, you get an opportunity to sell an ad, to sell a membership for delivery, to get additional data. And it all does work together in a mutually reinforcing way. And so as I mentioned just a minute ago, that's nice for us in that it mixes us up. It not only gives us top line growth, but it gives us bottom line growth. I'll just wrap up by saying it is still an item business and it's still fun. We talk these days a lot about. Our technology and our investments, but when it gets to this time of year in particular, the hot toy is going to be fun to talk about the Thanksgiving meal. That's a lower price this year than it was a year ago. It is fun to be part of. We're sitting in a room today that's got a bit of Christmas feel to it, decor wise and it's exciting to be in this part of the year. Thank you. Our next question comes from the line of Scott Ciccarelli with Truist Securities. Please proceed with your question. Good morning, guys. So I think you've given us some numbers previously on how much of your EBITDA growth was coming from your ancillary revenue streams. So the questions are, do you have a number for that this quarter and then is it possible to rank the drivers between advertising, membership, 3P, et cetera? Thanks. This is John David. I'll take that. The numbers this quarter are pretty similar to last quarter. So membership fees as well as advertising income contributed to a little more than half of our operating income improvement and a little shy of a third of the overall operating income for the business. Those are important growth drivers to our business, but they don't work without getting the basics right on core retail. So I think we're striking a nice balance for all of that. It is worth noting that this quarter our business is 18% E commerce. And reflecting back on Christina's question, that's a 300 basis point improvement from this point last year. We continue to make progress in these digital channels. Clearly our customers are finding value in what they're, what they're finding at Walmart. Can I just add on that one too? I think, you know, you look at our results, we've consistently grown profit faster than sales every quarter this year. And when you break it down, it's largely those ancillary businesses that are higher margin that are driving the result. I look at our advertising business is up 50% and that is largely because of BBD. But the other markets growth is also strong and we'll see that kind of as you look at the half versus the quarter, we look at the growth in those businesses, it's advertising revenue, it's membership. We're seeing like membership grow across each of the individual markets with slightly different offerings, but all of them tailored to what are the needs of the local consumers. So that with the addition of financial services as well is really helping that whole model play out. And the consistency of the execution across quarters I think has been one of the things I'm most proud of. Maybe one more thing to add, whether it's the international business or here in the United States, when we look at the composition of growth in GMV for us as an example, there's a healthy balance between increased traffic and improved conversion. So you've got more shoppers that are coming to Walmart or Walmart properties that are finding value in price and convenience. But we're also getting better at how we serve those customers. And I say that through conversion, getting better at converting someone who may just be eyeballs looking at our website to actually completing a checkout and putting something in their basket and having it delivered to their house. So we're pleased with our progress, but it also indicates we still have a long ways to go. We know that we can get better and our team is very focused on that. Thank you. Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question. Hey, thank you. Good morning. So maybe as a follow up to Scott's question, you did flag general merchandise should continue to improve in the coming quarters and I'm wondering if that continued improvement could have positive implications for some of these high value revenue streams such as marketplace, which accelerated nicely here, and supplier advertising and the like. Sure, Peter, everything else being equal, you would expect that to have a positive benefit to the P and L as GM items tend to carry a higher gross margin than many of the grocery items. So we look forward to being able to benefit from that. But some of that is on us and continuing to grow our assortment through our marketplace. But some of it is a very function of the economy overall and so we'll watch that closely. Thank you. Our next question comes from the line of Peter Benedict with Baird. Please proceed with your question. Good morning everyone. Thanks for taking my question really just around. It's around competition I'm curious your observations, what you're seeing in terms of the competitive response to the share gains that continue to accrue to the business. I'm thinking primarily in the US but really any comments around that would be helpful. Thanks. Peter, this is Doug. I think the only thing that I would say is that the competitive set we focus on today is different and it's changing over time, probably at a more rapid rate than it used to. Being in China and Mexico recently, we have some strong competitors there and the ones we're focused on and learning from are different than the ones that we were focused on just a few years ago. Here in the US we have fierce competition from all kinds of different directions. So our mindset is to be aware, to watch, to learn, and when we see the customer responding to something, to react if it makes sense for us to react and to change if we need to change. So we try to stay focused, straight ahead, eyes on customers, members focused on our associates have our competitors in our peripheral vision, but study them and learn and apply. I think you can see that in some of our results today. Thank you. Our next question comes from the line of Karen Short with Mealy's research. Please proceed with your question. Hi. Thanks for taking my question and good to talk to you again. I kind of have two interrelated questions. So your OpEx at 21.2%, wondering what the potential is to get closer to 19% or get back to 19%. And obviously that's in the context of, you know, E. Comm as it relates to losses. And then the second portion is just with all these alternative revenue streams that you have, at what point are you looking at a materiality conversation? Thank you. Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question. Karen, clearly those questions are for me. This is John David. We report. I'll take them in reverse order. We report on a segment basis right now and that satisfies the requirements that we have for segment reporting. So we'll continue to report out by international SAMs in US if something changes in our business, we'll reevaluate that in the future. On opex, there are a couple drivers. First of all in the current quarter to the increase and then I'll address your question related to where it could go. But in the current quarter, we saw a little bit more investment in marketing in the US Business and that's helping to drive some of the performance in general merchandise. So we're really pleased about that. The other is incentive payment for our frontline associates. We think it's important that our frontline associates are rewarded in the Same way that shareholders are. And as we've outperformed this year, we've seen additional incentive pay for them and that pressured SGA in the third quarter. The other element gets to I think the essence of your question, which is the changing mix of our business. If you look at SGA on a brick and mortar basis, it's less than what you have in digital channels. And so as we continue to grow digitally, as we continue to have more of our business that's coming through E commerce, you're going to see some pressure on SG&A. That said, the team here is very focused on continuing to try to provide everyday low cost to enable us to have everyday low prices for our customers. And so we'd love to get back to the 20% range on SGA. That requires work. But there's in any company, especially one our size, there's always opportunities for efficiencies and the use of technology to better serve our customers and members. So we're working on that. But you have to keep in mind going forward that as we get more digital you're going to see pressure on the SG and A line. Great. Good morning everyone. Obviously the strength in the quarter was broad based but I wanted to focus on the acceleration in average ticket in the U.S. i think that was the strongest in over a year. I am curious if that was impacted by the hurricane or if there's some other type of inflection that you're starting to see, you know, in basket size, maybe an improvement in GM or attachments. Is that also maybe a benefit of attracting that higher income consumer? Just any more context on that as we think about the run rate going forward. Thanks so much. Yeah. Morning. This is John. I think, I think everything you said, it does represent some of the improvements that we did see in the quarter. We did mention that there were some tailwinds from some one time events that happened the quarter. But the thing that I'm really proud of the team is we had the highest growth in units and food that we've seen in several years, which is great. Our general merchandise business as we mentioned, despite some deflation and low single digits to mid single digits range were positive comps. So the units outgrew that. It is all I think a reflection of starting with are we selling the things that customers want to buy during the season? They're in seasons are important. We ended October with a strong Halloween. So all those added up are Important. And the shift from, I'd say not necessarily from, but adding on digital business on top of our store business is helping us attract new customers and serve them well with the options that we have. The combination of both the product and the service offerings are working. The growth in the deliveries under three hours is impressive. The team's doing a great job with that and we need to continue that. We know customers are looking for both value and they're looking to save time. Thank you. Our final question this morning comes from the line of Greg Melick with Evercore isi. Please proceed with your question. Hi. Thanks guys. I wanted to follow up on the membership growth and what's driving that there and what sort of behavior you're seeing in terms of lift from people when they do sign up for Walmart plus in particular and what that flows through in terms of the importance of data and then using that in the new businesses. Hey, Greg, this is John. I'll start with Walmart Plus. Walmart plus is a really important part of the offer. As we said this morning, we have a clear strategy. Our results reflect the financial framework that we have laid out. The growth in E commerce is an indicator of where the customer is headed and Walmart plus is a great way for customers to amortize the cost of delivery over time. And so when someone joins the program, you know, we're focused right away on ensuring that we deliver their order on time when they ask for it, not ahead, not after, and that the order is full and it's complete with as few substitutions as possible. And when we do that, well, that opens up the ability for the business to talk to them about other things that are going on in their life, whether it's changing the tires on their car or helping them with a birthday cake. There are just so many things we can do in core retail that makes life easier, add a value for our customers. So this is an important part of the overall equation we mentioned. Results up over double digit in Walmart plus again, so good to see the momentum and you know, looking from here forward in this quarter in particular, it's about executing really well. We need to be really clear on our offer. We need to pull the orders on time without substitutions and we need to deliver to customers exactly what they're looking for. This is the time of year when families get together for meals and gifts and it's really important that we're there for them and we enable them to have the best season they can have. I'll just add from an international perspective, I Think when we think about membership, there's a bit of a spectrum. So if you think about in Chile, we actually have a loyalty program which allows us to have over 80% of our customers data. And then if you look at it in Mexico, we've just launched Beneficios which has allowed US to get 28 million members sign up, which allows us just to be a lot more personalised in the way that we show up for those members. Those are free loyalty membership programs right through to a paid membership where you're really bundling delivery capabilities. If you look at that, we're seeing growth across most of the major markets. But if I then just point to Sam's China, they've had membership income grow of over 30% and I think that is a testament to the quality of their CVP and how attractive that is to our customers. Not only the in club offering but also the ability to do convenience with like over 80% of their deliveries being under an hour. So we think about membership as a way of driving loyalty to create the ability to personalise, to have a richer, stickier relationship with our members and to bundle up the ability to do delivery which is something our customers are telling us is really important. Yeah, I think in Sam's club we had a 15.1% growth in membership income. But none of this is a gift, it's all an achievement, it's just hard work. John talked about execution. We are executing on our member value proposition which is value, it's assortment, it's great experiences and it's building that trust with the members so that you build a lifelong relationship with them them. We had some great results as you've heard in E commerce and in club, which we're really proud of and we've seen the outcome of that. So great inputs give you great outcomes and we've seen Digital penetration increase 400 basis points scan and go up 250 basis points and that's resulted in all time high memberships increasing plus penetrations up 300 basis points and our renewal is up 230. So you know, just really nailing those basics, listening to your members and giving them what they want gives you great outcomes. All right, I want to thank everybody for joining us today. We look forward to engaging with many of you in the coming weeks and months at investor conferences. I want to ask you to mark your calendars for our next investment community meeting which is on April 8th and 9th, 2025. Doug, really proud and grateful to the team and of the team, the folks that are in this room are leaders more broadly and our associates around the world. They're doing a nice job of delivering short term results, managing today and building for tomorrow at the same time so that we can continue this momentum. I think we are being appropriately aggressive as it relates to our level of investments, whether that's related to price or associate investments or automation, for example. And I'm really encouraged by the way folks are working together with our tech teams to build things in a way that's faster and more effective. We've got room to improve there, we probably always will. But when I look at what we're putting together, the combination of businesses, I think the outcome is one that can continue to grow the top line while growing the bottom line faster in a sustainable way, but while making the necessary investments as we work towards trying to serve people better. For decades, it's been my experience that our customers and members want four things from us. They want low prices. They want a really broad assortment of products and services. They want to have a great experience, and that includes convenience and saving them time. And they want to do business with somebody they trust. And in this business, you get what you earn. So we are working hard today to make sure that tomorrow we're continuing to have quarters like the one that we had this quarter. Thank you all. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.",
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          "text": "Yeah, Simeon, I'd add that it does feel very consistent to us. The one exception to that is maybe the timing of the big billion days event. As you know, that can fall into the third quarter. Some years, fourth quarter, other years goes back and forth. Because of the way it fell. This year, it added about 60 basis points of growth to the top line for us in 3Q. It also will work against us in 4Q. But other than that, which is just a timing element, the business is performing very consistently, as Doug said.",
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          "text": "Share as it relates to profitability in E Commerce.",
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          "text": "Thanks. Good morning, everybody. Can you Speak to the changes in the 4Q operating income guide relative to where you started the year at the FX change, to what extent did you change the top line outlook overall and in the us Then he called out Sam's wage investment. But was there any changes in your expectation around gross margin given what you're seeing in the alternate profit pools? And you know 4Q is a big spike in terms of volume. So could that tilt the U.S. e commerce business to profitability? Thank you Chair Powell.",
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          "text": "Our technology and our investments, but when it gets to this time of year in particular, the hot toy is going to be fun to talk about the Thanksgiving meal. That's a lower price this year than it was a year ago. It is fun to be part of. We're sitting in a room today that's got a bit of Christmas feel to it, decor wise and it's exciting to be in this part of the year.",
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          "text": "Hi, Good morning. Thank you for taking our question. We wanted to focus our question today on general merchandise and Gross margins. While general merchandise inflected positive in the.",
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          "text": "Greetings and welcome to the Walmart third quarter fiscal year 2025 earnings call. @ this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Steph Whitting, Senior Vice President of Investor Relations. Thank you. You may begin.",
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          "text": "Thank you. Welcome everyone. We appreciate you joining us and your interest in Walmart. Joining me today from our home office in Bentonville are Walmart CEO Doug McMillan and CFO John David Rainey. Doug and John David will first share their views on the quarter and then we'll open up the line for your questions. During the question and answer portion, we will be joined by our segment CEOs John Furner from Walmart US, Cath Maclay from Walmart International, and Chris Nicholas from Sam's Club. For additional detail on our results, including highlights by segment, please see our earnings release and accompanying presentation on our website. We will make every effort to answer as many of your questions as we can in the hour we have scheduled for this call. As a courtesy to others, please limit yourself to one question. Today's call is being recorded and management may make forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the sec. Please review our press release and accompanying slide presentation for a cautionary statement regarding forward looking statements as well as our entire safe harbor and non GAAP reconciliations on our website@stock.walmart.com Doug that concludes my intro. We're ready to begin.",
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          "text": "Good morning and thanks for joining us. Our associates delivered another strong quarter, continuing our momentum. They're working hard to save our customers and members time and money while simultaneously transforming our business for the future. For the quarter, sales grew 6.1% in constant currency and profit was up 9.8%. Globally, we drove strong growth in e commerce up 27%, advertising grew 28% and membership income was up 22%. This helped us grow profits faster than sales. Even as we work to help lower prices and invest in our associates. The rapid growth from these newer businesses is helping us strengthen our business model. All three segments of our business performed well. Sales for Walmart International grew 12.4% in constant currency. Comp sales for Sam's Club US were 7% and Walmart US delivered comp sales of 5.3%. Transaction counts and unit volumes were positive across each segment and we continued to gain market share in the US Both in grocery and general merchandise. Households earning more than $100,000 made up 75% of our share gains in the US in store volumes grew, curbside, pickup grew faster and delivery sales grew even faster than that. Becoming more convenient for our customers and members is helping drive our growth. We had almost no like for like inflation in the US this quarter. It was nice to see general merchandise grow low single digits in the US even as prices are deflated by over 4%. We currently have about 6,000 rollbacks in.",
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          "text": "Walmart US across all categories.",
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          "text": "We're feeling some margin pressure from growth in GLP1 drugs, so we're pleased to see general merchandise sales be positive across the company. Inventory is in very good shape. The unique characteristics of this quarter included a US Port strike, two large hurricanes, and the flooding they caused. Our team did a really nice job preparing before those events and they worked hard to aid recovery after the storms. The team that comes together from across the company to form our emergency operations center is impressive. They coordinate closely with federal, state and local leaders. They make sure our associates are accounted for and safe and we set up distribution points at stores in the affected areas where we serve hot meals, give away supplies, offer showers, laundry services and phone charging. Through Walmart and the Walmart foundation. We made a $16 million commitment which we've delivered on. This includes 178 truckloads of needed supplies and cash grants totaling nearly $10 million to support our truck drivers and other associates helped facilitate or serve 544,000 meals in the affected areas supported by our non profit partners. Our customers and members contributed an additional $14.5 million from in store and online campaigns. I got a chance to see our associates in action in Georgia and here in Bentonville and I couldn't be prouder of them all. In total, the storms in the port strike lifted our sales growth by a small amount and negatively affected operating income growth by a larger amount. The takeaway should be that we delivered on our financial framework despite the noise from these events. This was clearly a strong quarter and the changes we've been working on for years are continuing to bear fruit. We're well positioned to serve people how they want to be served, whether that's coming into a store, picking up an order or having it delivered. Our team has changed, developed new capabilities and learned how to work in new ways. We build new tech more effectively than we used to and we're doing it with more speed. This is a more customer and member centric organization. I got to attend our Sam's Club grand opening in Grapevine, Texas a few weeks ago and it was exciting to be there. We made quite a few changes to the design of this club. We have an expanded area for curbside pickup and delivery orders, new category adjacencies with consumables near the pickup and delivery staging area and a stronger general merchandise presentation that has improved the sales mix of those categories. Boldly, our SAMS team also eliminated traditional checkouts so our members can use Scan and Go and the new Computer Vision Exit technology to exit the club faster. Just imagine a 150,000 square foot Sam's Club with no traditional checkouts. The week after that grand opening in Texas, I made a trip to China. The week before I arrived we opened our 50th Sam's Club there with 60,000 members. All 50 clubs are performing well and we have more to come. About half our sales in China are digital, thanks in part to our network of over 350 club distribution points which provide one hour delivery service to members, extending the reach of our traditional clubs. We've learned a lot from operating around the world and we continue to learn from places like China where social commerce including live streaming are growing quickly in places like India where financial services have digitized at scale. Last week I got to spend a couple of days with our team in Mexico where our team is driving innovation in lots of areas including with our cellular service bite, our financial services business Kashi, and with Healthcare Services where We've helped over 400,000 customers visit a doctor in our in store Healthcare clin. As in other markets, our walmax team is growing E commerce, adding newer businesses including marketplace and advertising and becoming an omnichannel retailer. As I mentioned last quarter, we're seeing early tangible results from the deployment of generative AI. I'm a little hesitant to talk about AI because I know someone will hear this in the months and years to come and chuckle about how old school it sounds given how fast things are changing. But it's important to convey that we're learning and applying generative AI, AI and machine learning to solve the practical opportunities right in front of us. Our data sets are valuable and we're learning to put them to work to improve the customer member experience and assist our associates as they do their daily work. I'll build on the example I shared last quarter about how Genai has helped us improve our product catalog by mentioning the Personal Shopping Assistant we're building. We've had it in beta form for five months and it continues to improve. I'm excited about how it will improve the customer experience in the months and years to come, enabling us to provide a better experience than the one that starts by typing into a search bar and getting a list of results to choose from. We're racing to improve all the things that people love about shopping and remove or diminish all the things they don't in addition to the customer facing work 15 months ago we deployed a Genai tool to all of our US Home office associates. It's called My Assistant. We've expanded access to Home office associates in 13 additional countries and we continue to see engagement grow. It provides our associates a place to access knowledge and time saving actions in a secure environment. Since launch, 50,000 associates have used my assistant to ask 1.5 million questions. Our leaders can get insights into people related metrics such as hiring and retention and associates can get answers to common policy questions like how do I order my discount card? Through a conversational experience. We'll continue to build on these use cases to enable more productivity and help identify the next best task for our associates in stores and clubs. Just as we're enhancing the customer experience with Genai, we're working to remove friction for our associates so they can do high value work that they enjoy like serving our customers and being merchants. I continue to be excited about how our associates are learning and changing the way they think and work. With that, I'll wrap up and turn it over to our CFO whose Baylor Bears beat my Arkansas Razorbacks in basketball recently. We'll see you in March, John David.",
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          "text": "Well, we look forward to that Doug. I hope the Razorbacks have a good season, just not as good as the Bears. I want to start by thanking our team for delivering another strong quarter. We're encouraged by the steady momentum building across the business. Importantly, the drivers of our outperformance are similar to the past several quarters, with customers and members continuing to respond to our value proposition. As we provide lower prices and greater levels of convenience, we're broadening our assortment, improving customer experience and earning their trust while seeing share gains as a result. We're also realizing benefits from the investments we've made in our core Omni retail business and seeing improved profitability with newer businesses. We're executing on our strategy and the business model is delivering as it's designed to do, with operating income growing faster than sales and yet there is much more opportunity ahead. As Doug noted The hurricanes that impacted the southeastern United States resulted in unanticipated expenses during the quarter. I'm incredibly proud of how our team responded to support the communities that we serve, using our fleet of semi trucks, supply chain logistics capabilities, product inventory and financial resources to support the restoration effort. At the peak of the storms, we had about 400 stores, clubs and DCs closed. We're pleased that all of our associates in the affected areas remain safe and we continue to support them during this disruptive period. We've since reopened all of our super centers except for two that were extensively damaged, and we're in the process of restoring these stores to serve customers again as soon as possible. Now let me review the highlights of our financial results. Q3 sales, operating income and EPS all exceeded the top end of our guided ranges. Enterprise net sales growth was over 6% on a constant currency basis with all three operating segments outperforming our expectations aided by strong E commerce growth. Walmart US comp sales increased 5.3% including e commerce sales growth of 22%, growth in customer transactions and units across stores and E Commerce remains strong. Store fulfilled Delivery increased nearly 50% and surpassed $2.5 billion monthly run rate. We've now had 12 consecutive months of deliveries above $2 billion. Food categories were especially strong this quarter with unit volumes growing by the highest level in four years. We also generated mid teens growth in health and wellness due largely to branded pharmacy scripts including GLP1. GLP1 sales contributed about 1 point to the segment comp while continuing to create mix pressures in gross profit. We're encouraged by the improvement in general merchandise where we had low single digit comp sales growth including strength in home, hardline and toys. US customers remain resilient with behaviors largely consistent over the past four to six quarters. They continue to seek value to maximize their budgets while also choosing convenient options to save time. Our efforts to bring down pricing have helped as total like for like inflation has remained close to flat for the past four quarters with Q3 general merchandise and consumables deflationary and food inflationary in the low single digits. We're seeing higher engagement across income cohorts with upper income households continuing to account for the majority of our share gains. Our international business had another strong quarter with constant currency sales growth of 12.4% reflecting strength in Flipkart, Walmex and China. We saw positive unit growth across markets with sales strength in both general merchandise and food and consumables. E Commerce sales increased 43% and penetration grew across all markets, with speed of delivery becoming increasingly important to customers. In the last 12 months, International delivered over 2.1 billion items same day or next day, with about 45% of those delivered in under one hour. Flipkart's BBD or Big Billion Day sales event was up double digits in both top line and customer growth. The timing of the event was earlier than last year, benefiting our year over year sales comparisons in Q3 with the corresponding headwind expected in Q4. WALMEC's growth outpaced the comparable market for the sixth consecutive quarter and our business in China continued to grow double digits with strength in Sam's Club and E Commerce. Fompay also had a good quarter with monthly transactions surpassing 8.7 billion and total annualized payment volume of approximately $1.6 trillion. Sam's Club US comp sales ex fuel increased 7% including e commerce growth of 26%, with increased transactions and unit volumes accounting for almost the entirety of the comp growth. In response to member feedback, Sam's rolled out new perks in August like express delivery and the elimination of curbside pickup fees for club tier members which helped E Commerce growth. Since that launch, E Commerce growth has increased by more than 700 basis points versus our trends in the first half of the year with club fulfilled delivery more than doubling in that period. The convenience Sams provides both inside the club and via E Commerce is a differentiator in the warehouse club channel Scan and go. Penetration of sales increased more than 250 basis points and the nearly completed rollout of our JESCO exit technology across all 600 clubs is enabling about 70% of members to exit without a check. Members love it. With member satisfaction scores on exit now close to 90, our frictionless approach to serving members by leveraging technology is on full display at our new club opened in Grapevine, Texas, the first of 30 new clubs we expect to open in the coming years. If you're in the area, we'd encourage you to check it out from a margin standpoint. Consolidated Gross margin expanded 21 basis points led by Walmart U.S. with international results pressured by the timing of Flipkart's BBD sales event in the U.S. improved margins reflected strong inventory management again this quarter with a 0.6% decline on more than 5% sales growth as well as a lower level of markdowns that has allowed us to manage pricing aligned to competitive price gaps. Providing everyday low prices for our customers and members remains a priority and we continue to lower prices in the US across our assortment of national brands and private brands. During the quarter, we had price rollbacks on approximately 6,000 items across our assortment, including around 3,000 items in grocery, and have converted nearly 2,000 price rollbacks over the past year to long term price reductions. We're pleased with how customers and members are responding to our strong value proposition. As our business model evolves, it's encouraging to see our margins improve from a diverse set of offerings. Global E commerce losses continued to narrow in Q3, most notably in Walmart US. While improved business mix helped, we're seeing good progress in core E commerce margins. There are a few key factors driving this delivery densification, increased penetration of paid expedited delivery orders and the automation of our supply chain. As we scale our store fulfilled delivery business and expand our catchment areas, we've seen significant improvement in batch density with orders per delivery up 20%. In addition, the popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than one hour or less than three hours. And lastly, we continue to make progress in the automation of our supply chain as now more than 50% of our fulfillment center volume is automated, which is twice as much at this point last year. This has the obvious benefit of lowering the per unit cost of delivery. These factors Contributed to the third consecutive quarter of approximately 40% reduction in US net delivery cost per order. Importantly, while we drive greater efficiency, we're enhancing service levels with customer NPS for delivery reaching all time highs this quarter. We're also continuing to reshape our profit composition and business mix as we scale growth drivers such as advertising membership, marketplace and fulfillment and data analytics and insights. Our global advertising business increased 28% in Q3 driven by 50% growth in international led by Flipkart which was aided by the BBD event as well as another strong quarter from Walmart connect in the US which grew 26%. We're building a highly unique retail media platform and have been encouraged by ongoing tests showing customer receptivity to growth in digital ads, especially where ads help customers discover relevant items that are trending, navigate and compare choices and enjoy Walmart's everyday low prices. We're also pleased with the trends in our membership programs in the U.S. sam's Club continued to grow membership count and increase its penetration of plus members resulting in 15% membership income growth while Walmart plus membership income grew double digits again this quarter. Within international membership income in China from our Sam's Club business grew more than 30% as member counts continue to increase for Marketplace and Walmart fulfillment services in the US marketplace grew 42% in Q3 and we've now seen more than 30% growth in each of the past five quarters. The number of sellers on the platform continued to grow double digits and SKU count is approaching 700 million items. With a broader assortment of the brands and items customers want. Marketplace sales in beauty, toys, hardlines and home all grew more than 20%. We continue to leverage our next generation supply chain and technology to provide fulfillment for sellers at some of the lowest rates in the industry. As a result, more sellers are using our marketplace fulfillment services, with WFS sales penetration reaching record highs at more than 40%. Outside of the US we're seeing similar encouraging trends. For example, our marketplaces in Mexico, Canada and Chile combined increased items by 20% versus last year. In Mexico, the number of items delivered through WFS grew over 50%. And during Flipkart's big Billion Days event we experienced same day delivery growth two and a half times higher than last year. This quarter, Flipkart also launched its quick commerce service called Flipkart Minutes in a number of cities, offering Delivery in under 15 minutes for a variety of items including groceries and electronics. And within data analytics and insights, Walmart Data Ventures continues to grow rapidly with net sales up double digits. Our client base has more than doubled over the past year and we're excited about continuing to broaden our reach to new markets by launching the platform in Canada this month. As a reminder, the margin gains we've reported this year in the US have been burdened by meaningful product headwinds from the outsized sales growth in health and wellness relative to general merchandise. Our plan calls for general merchandise to improve in future quarters, but to continue to underperform health and wellness in grocery until we return to more normalized purchasing cycle across GM categories, we remain focused on building out our marketplace assortment and emphasizing early emergent categories like apparel, home decor and automotive supplies. We're continuing to optimize our business to deliver greater efficiency and we're committed to balancing ongoing investments with improved returns for customers, associates and shareholders. Our evolving business model with more diversified and durable sources of profit has provided the ability to fund investments while also delivering on our financial framework of operating income growing faster than sales. Price gaps remain healthy and we continue to advocate on behalf of customers for lower prices, wrapping up Q3 results. Consolidated operating income grew 9.8% in constant currency and adjusted EPS increased nearly 14% to 58 cents per share. Now turning to guidance, we are raising our full year Guidance to reflect strong third quarter results on a constant currency basis, we now expect full year sales growth of 4.8 to 5.1% and operating income growth of 8.5 to 9.25% versus prior guidance of growth of 3.75 to 4.75% and 6.5 to 8% respectively. Compared to our guidance that we provided at the start of the year, we now expect operating income to grow nearly 400 basis points more at the midpoint. Adjusted EPS is expected to be between $2.42 and $2.47 versus prior guidance of $2.35 to $2.43 this full year guidance implies fourth quarter constant currency growth in sales of around 3 to 4% and operating income around 5 to 7.5%. This guidance is slightly above our prior implied Q4 range and contemplates a series of wage investments that Sam's Club announced on September 17th to be effective in Q4. Recall that we guide sales and operating income growth on a constant currency basis. Currency fluctuations impacted the business negatively in Q3 after being a tailwind in Q1 and neutral in Q2. In Q3, currency pressured reported sales and operating income growth by about 70 basis points and 160 basis points, respectively. If rates stay where they are currently, we would expect a headwind to Q4 reported sales and operating income growth of approximately 100 basis points and 200 basis points respectively. In closing, while we still have one more quarter to go before we close out this year, we're really encouraged by our operational and financial performance. We have a lot of conviction in our strategy and the leaders sitting around the table with me today, along with our team of over 2 million associates around the world, are executing on it. Hopefully you share my sentiment and are as excited as we are to see what else is to come. We appreciate your interest in Walmart and are now ready to take your questions.",
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          "text": "Thank you. If you'd like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using space speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. As a reminder, we ask that you each keep to one question. Thank you. Our first question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question.",
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          "text": "Yeah.",
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          "text": "Thank you. Our next question comes from the line of Peter Keith with Piper Sandler. Please proceed with your question.",
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          "text": "And as we've said several times, when.",
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          "text": "A headwind based on everything you walked through today.",
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          "text": "Do you have a view on when this gets more balanced? And if we were to see a more balanced growth rate in general merch.",
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          "text": "Versus consumables and the growth of the alternative revenue businesses, what could gross margin expansion look like?",
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          "text": "Hey Kate, this is Doug as it.",
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          "text": "Relates to general merchandise. I'll go first and then ask all three of the segment leaders to speak. We love general merchandise first party, being a first party merchant, something that we obviously grew up doing. When you go into our stores and clubs right now, the seasonal impact of GM is exciting and energizing and so this is something that we're passionate about. And in today's world we can grow first party general merchandise in stores, in clubs plus through E commerce with both pickup and delivery and the expansion of the marketplace. So I think we've got a lot of opportunity. Kind of big picture from a GM point of view. John, why don't you go first and then Chris and Kath can chime in.",
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          "text": "Sure. Good morning Kate. Thanks for the question. As Doug said, we're excited about the season. We're excited about seasonal merchandising. I've been stores just the last couple months in Utah, California, last week, Philadelphia, Tennessee. List goes on and on and the stores are ready. They're really set for the season. We had a good back to school, we had a good Halloween and it's important to string these holidays together so we go into the season with momentum. We're excited about that and we think we have a great plan for the season. It's early November so the team will be working on consistent execution the next couple months to deliver the best quarter we can for our customers. As we said, general merchandise has improved. We are still experiencing some deflation in general merchandise. This is in the low to mid single digits range. That hasn't changed for some time. But we were positive in comp due to growth in units primarily coming out of, as we said earlier, home toys, some of our hard lines categories. We're seeing some real bright spots as well in the marketplace with fashion and apparel. Really excited about the mix. We have a lot of ways that we can deliver to the customers whether it's in the store, which really excited again as I said about the stores being set seasonally and with our E commerce business growing at 22% in the quarter, that puts us in a spot with some momentum as we enter the fourth quarter. Maybe Chris Go to you at Sam's.",
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          "text": "Yeah, thanks John. I mean, just a lot of similarity there with us. We love general merchandise. We get very excited about items. And if you think about the way that we've constructed all of our strategic priorities, this is not just a consumables and food game. It's a, is definitely a GM game. If you think about increasing digital engagement, the growth in E Commerce that helps people see the great items we've got then investing in the value proposition, we're investing in a grapevine and Doug talked about it in his opening remarks. We've put a lot of effort into how we merchandise both the items you can buy in club but also the items that you can buy online in this online to offline connectivity. And it's really powerful. And we're seeing significant increases in the participation of general merchandise in that club, which I think is the best articulation of our strategy physically that we have today. There's a couple of other things I'd say from a comp point of view. We're really happy to see the second quarter of positive comps on gm but units are still moving ahead of comps, so there's still good value out there. And similar to John, like in home tech, toys, seasonal decor, all doing really well. And back to college and Halloween were also really strong. So we see that momentum continuing.",
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          "text": "Thank you. Our next question comes from the line of Christopher Horbers with JP Morgan. Please proceed with your question.",
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          "text": "I'll address this and others may want to join in. Chris, the way to probably characterize this, if you look at our guidance last quarter versus what's implied this quarter, there's a modest improvement in 4Q performance. There's not been a lot of change before that. In terms of Our outlook for 4Q. The business has been performing, as we've said, pretty consistent in terms of gm. Maybe one thing that has improved and been a little bit better than what we expected at the beginning of the year. And by gm, I'm talking gross margin is shrink. Shrink has performed a little bit better in the US and Sam segment for the first part of the year here. But other than that, the business is continuing to perform very consistently with prior quarters. Some of the more digital businesses, the newer businesses that we have did inflect a little bit higher in 3Q I think also keep in mind that that's a function of the movement of big billion days that I just mentioned. But if you just go the list you look at as an enterprise, 28% advertising growth, 42% marketplace growth, 22% membership income growth like we we are executing our value proposition is resonating with customers and that's why you're seeing us gain.",
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          "text": "You look at the shape of the new income statement and you split it between the original income statement that looks like a store P and L and the new income statement that's got membership, advertising, fulfillment services, data, monetization, maybe some other things in it, it's more profitable.",
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          "text": "And I say from an international perspective, we saw strong growth in GM in Mexico, India and China and not surprisingly in those markets too. Convenience is really important. And so as we kind of are growing our strength in delivery from the same day and also within the hour, we're seeing the GM growth continue to kind of correlate with that convenience play.",
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          "text": "I think to drive GM growth over the next few years, E Commerce becomes crucial. Obviously we've seen good growth there recently, but we got a lot more opportunity. And this week when we were in Mexico last week, we saw a pop up toy shop outside of one of our stores that is just dominant in the toy category. It looks gorgeous, fun to shop, kids love it. We just have such an opportunity in the physical world as well as in the digital world to create excitement with general merchandise.",
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          "text": "Thank you. Our next question comes from the line of Michael Lasser with ubs. Please proceed with your question.",
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          "text": "Good morning. Thank you so much for taking my question. What is Walmart finding out about its ability to drive steady growth in the core business while reinvesting back in areas like price and wages to lay the foundation for the future? And as the company generates more evidence of the growth of the emerging alternative revenue stream. Does it make sense to invest even more in these areas or are there diminishing returns such that the overall enterprise wide profit growth can accelerate next year and beyond even as you make sizable investments back in the business? Thank you so much.",
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          "text": "Yeah, thanks, Michael. This is a real time conversation that we have all the time. Are we investing the right amount back? You called out prices and wages. I think those are the two areas that would come to the top of our list too. We think we are investing the right amounts, obviously, but it is a fluid situation. We watch price gaps, we watch what's happening in the employment market and have freedom now to be able to make different investments if we want to. So I think from a kind of an income statement point of view, I feel like we're being appropriately aggressive. And on the capital side, you know that we've made some significant decisions over the last few years to invest in automation in the supply chain, for example, but we're also being, I think, very aggressive as it relates to store and club remodels. So I feel like on the capital side, we're also being aggressive. And as we do that, because of the way that we've set ourselves up, we can grow profit faster than sales and do those things at the same time. It's just a matter of degree and we will manage that as we go from week to week.",
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          "text": "Yeah, Michael, I would add to Doug's point that we feel like we're striking the right balance between profit, expansion and investment in the business. We're all very focused on making sure that we are healthy for the next generation. We certainly provide an outlook over the next three to five years, but we want to continue to have the same type of financial performance after that. And that requires a level of investment in the business. And as Doug said, we feel like we're striking that balance appropriately. In terms of your part of the question about our ability to maybe accelerate profits into the future, look, we're comfortable with the outlook that we provided where we said that the way to think about our financial architecture over the next several years is that operating income will grow faster than sales and sales should on average be about 4%. Some years will be a little better, some years may be a little bit worse. We've had two years now since we provided that outlook. And if you look at our performance last year and our performance year to date, along with our guidance this year, that would suggest that on the top line, we've grown about 5% and grown profits about 10%. We're really pleased about that. But that is not a matter of us being overly conservative or conservative or anything like that. It's really, excuse me, it's really a matter of execution by the team sitting around this table. With anything that we do with any strategy that we have, there's a always going to be things where you areas where you overperform and underperform. But what you've seen is this team has done a really good job at executing on the basics and also our newer, faster growing businesses. And so that's reflected in our financial performance. And if we execute better into the future, yeah, perhaps profits could grow faster. But the financial architecture that we've laid out is still what we believe today.",
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          "text": "Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.",
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          "text": "Good morning. Hi, everyone. I wanted to talk about the top line, which it looks like it accelerated. Q3 versus Q2. The underlying run rate. There were some storms, and I know we mentioned port strikes. Can you talk about the underlying inflection you're seeing? What do we attribute it to? I don't know if it's merchandising, marketplace membership, all the above. And have we inflected? Does it feel like we've inflected to a higher growth rate? Thank you.",
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          "text": "To me, it feels like it's pretty consistent.",
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          "text": "If you look at what happened in the first three quarters and the underlying rate, and then you look at what happened in this most recent quarter with the storms, things did increase a bit, but I still feel like we're kind of running the same level of momentum and the same economy. The fourth quarter will be fun to watch. The calendar is not our favorite, with fewer days between Thanksgiving and Christmas. And I suspect when all that's said and done, it will be similar to the kind of momentum that we've seen in the first three quarters.",
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          "text": "You guys keep talking about. I was hoping you could sort of.",
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          "start_time": "00:37:49,880",
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          "text": "We don't think we should race to it. This is a long term game.",
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          "text": "The 1P 3Pmix is one dimension to manage, for example, and if we should carry more first party items and that somehow delays crossing a threshold of profitability, we're good with that because that's what customers want. That's what will drive growth. If investments in delivery speed cause us to reach profitability a little later, that's fine too. We want to deliver faster. I think we're very confident that we're going to make money in E Commerce. Whether that happens today, tomorrow, or a week from now, or a month from now, a quarter from now, I don't really care. The total works and we've got a great opportunity to grow our E Commerce business. I'm leaning long term. And at some point we'll tell you guys we made money in E Commerce and then just move on and not have that conversation anymore.",
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          "start_time": "00:38:52,896",
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          "text": "It just took a period of investment.",
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          "text": "Thanks for taking my question, Doug. This may be for you. I get a lot of questions on the share gains with upper income consumers.",
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          "text": "For us to get there. So again, we'll grow profit faster than sales. E Commerce will be part of the mix. Omni is our life, which we love. We think it's an advantage position and we look forward to someday telling you that we made money in E Commerce globally as it obviously varies by country as well.",
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          "text": "Thank you. Our next question comes from the line of Robbie Ohms with Bank of America. Please proceed with your question.",
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          "text": "Good morning.",
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          "start_time": "00:39:33,916",
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          "text": "Talk about it across three dimensions.",
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          "text": "You know, grocery versus general merchandise with.",
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          "text": "That upper income consumer price driving that versus convenience with that consumer, and then sort of stores versus this huge marketplace.",
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          "text": "Growth in terms of driving the upper income consumer.",
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          "text": "Yeah, Robbie, I'll go first, but I'll invite John or others to chime in here too. It is an all of the above answer. We want to sell grocery ngm. And if you go through and look at by category, by income level, it kind of plays out the same way general merchandise does in that people come to us to shop as a primary destination in many instances, and then they give us feedback across categories. And if you look at our offer in food and consumables, our shares are pretty high and consistent relative to some of the things we see in general merchandise. Over the years, we had a really strong market share in categories like toys, bicycles, but we had a lower market share in a lot of the fashion categories. That's basically just the customer telling us over the years, I'd rather buy my apparel somewhere else. But in an Omni world, we have an opportunity with brands, we have an opportunity with presentation to increase the amount of market share we have in some of those categories where we should have had a higher share all along. And that E Commerce opportunity is kind of bearing out. As we grow our assortment, we're able to appeal to more people and appeal to higher income levels. When I think about it from a category point of view, the themes look the same to me. We have more opportunity in fashion areas than we do in basic areas and that's always been true as it relates to price versus convenience. Everybody wants to save money and everybody wants to save time, but it's a continuum. And those that have more discretionary income and want to save time are liking what we're doing with both pickup and delivery. I think that's one of the things that makes this moment in time different. We do get the question from time to time about whether this is sustainable. I look at what's happened with Walmart plus and the relationship you get through a membership, what's happened with our remodels, what's happened with convenience and it gives me more optimism that this is something that's going to last a long time. And it was a different inflection point. Did I leave anything, John, for you to add?",
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          "text": "Maybe just to just push in from a sam's point of view. You know, whilst we serve all income cohorts, we do definitely skew higher than the core of Walmart. And what I would say is that they love price more than anybody. Like price is a core competitive advantage of ours, but great items and great prices we think isn't enough. And so you're seeing an acceleration in all of the metrics in SAMs because we're also leaning into experience and a big part of that is convenience. And we're really excited to see the impact of that.",
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          "text": "Well, those. Sorry, right on. I'll just add a couple things to that. Doug. I think you covered a lot of it. But Robby, we do get the question from time to time and we talk about the different ways that we can serve consumers and how that's different from say a decade ago or even five years ago as we've become Omni, we have the ability to sell customers in the store at the curb delivered to their home and we can do that whenever they want and in many cases however they want. You heard earlier the number of orders that are sub three hours and people are prioritizing time and price. So one of your questions is it's not an or. We want to be a great price and we want to be convenient and we can do both at the same time. The expansion in delivery catchments, the expansion with delivery, delivery, delivery density and the hours of operation have helped us lower our costs which enable us to serve customers more flexibly. So we can do both of those at the same time. In categories like grocery, yes, price obviously matters and so does quality. We do see and as we noted earlier, a large percentage of our market share gains came from higher income customers. That has been happening for several quarters and we see categories like gluten free and dry grocery or grass fed beef organic produce where our share in pickup and delivery is much higher and the mix is higher than in store. So we can be a great opening price point value in the store and we can sell high quality and we can deliver it the way that the customers want. And then last thing is, as Doug did mention, this expansion in E Commerce. Congrats the team for another quarter with momentum at 22% growth. Leading that growth is our marketplace team and our marketplace business, which just tells you that our customers are looking for more of an assortment than they've had in the years prior to this one from Wal Mart. And we're seeing bright spots in apparel, in toys, in healthy food. So it's, it's across the board. We have a lot of work left to do. Our assortment is growing. We think that will continue to happen over the next couple years. But it's great to see the momentum across so many channels.",
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          "start_time": "00:47:03,640",
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          "text": "Thank you. Our next question comes from the line of Scott Ciccarelli with Truist Securities. Please proceed with your question.",
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          "text": "Good morning, guys. So I think you've given us some numbers previously on how much of your EBITDA growth was coming from your ancillary revenue streams. So the questions are, do you have a number for that this quarter and then is it possible to rank the drivers between advertising, membership, 3P, et cetera? Thanks.",
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          "text": "That.",
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          "text": "Thank you. Our next question comes from the line of Christina Katai with Deutsche Bank. Please proceed with your question.",
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          "text": "Hi, good morning, Doug and John. David. I wanted to dig into the strength of E Commerce a little bit. I was curious if you could talk about what you think is a sustainable level of growth on a go forward basis. Clearly it's a much larger business but you have a lot more that are driving it as well. Whether we think about marketplace and membership, how do you see the rapid expansion of Marketplace sellers and SKUs contribute to both E Commerce growth and as we think about improving the profitability over the next several quarters. And as part of that, can you talk about general merchandise performance, what you saw both in stores and in the marketplace and then just from an assortment perspective as we think about newness and innovation that you called out, just what specifically are you excited most about? Holiday. Thank you.",
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          "text": "Is that all, Christina? I'm excited about this year. Not only the great items we have, but the convenience that we're going to provide. And I think you could just take our E Commerce growth rate over the last, I don't know, eight quarters and look at the trend line and you can expect that we're going to continue investing to create a better customer experience to result in more growth. We have a relatively low market share in E Commerce versus brick and mortar and that's our opportunity. I think all the investments we're putting in place, including supply chain automation, are aimed at capturing that opportunity. There's such a nice connection between these businesses. As you grow E commerce first party, for example, you get the opportunity to grow third party. As you grow first and third party E commerce businesses, you get an opportunity to sell an ad, to sell a membership for delivery, to get additional data. And it all does work together in a mutually reinforcing way. And so as I mentioned just a minute ago, that's nice for us in that it mixes us up. It not only gives us top line growth, but it gives us bottom line growth. I'll just wrap up by saying it is still an item business and it's still fun.",
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          "text": "We talk these days a lot about.",
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          "text": "This is John David. I'll take that. The numbers this quarter are pretty similar to last quarter. So membership fees as well as advertising income contributed to a little more than half of our operating income improvement and a little shy of a third of the overall operating income for the business. Those are important growth drivers to our business, but they don't work without getting the basics right on core retail. So I think we're striking a nice balance for all of that. It is worth noting that this quarter our business is 18% E commerce. And reflecting back on Christina's question, that's a 300 basis point improvement from this point last year. We continue to make progress in these digital channels. Clearly our customers are finding value in what they're, what they're finding at Walmart.",
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          "text": "Can I just add on that one too? I think, you know, you look at our results, we've consistently grown profit faster than sales every quarter this year. And when you break it down, it's largely those ancillary businesses that are higher margin that are driving the result. I look at our advertising business is up 50% and that is largely because of BBD. But the other markets growth is also strong and we'll see that kind of as you look at the half versus the quarter, we look at the growth in those businesses, it's advertising revenue, it's membership. We're seeing like membership grow across each of the individual markets with slightly different offerings, but all of them tailored to what are the needs of the local consumers. So that with the addition of financial services as well is really helping that whole model play out. And the consistency of the execution across quarters I think has been one of the things I'm most proud of.",
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          "text": "Maybe one more thing to add, whether it's the international business or here in the United States, when we look at the composition of growth in GMV for us as an example, there's a healthy balance between increased traffic and improved conversion. So you've got more shoppers that are coming to Walmart or Walmart properties that are finding value in price and convenience. But we're also getting better at how we serve those customers. And I say that through conversion, getting better at converting someone who may just be eyeballs looking at our website to actually completing a checkout and putting something in their basket and having it delivered to their house. So we're pleased with our progress, but it also indicates we still have a long ways to go. We know that we can get better and our team is very focused on that.",
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          "text": "Hey, thank you. Good morning. So maybe as a follow up to Scott's question, you did flag general merchandise should continue to improve in the coming quarters and I'm wondering if that continued improvement could have positive implications for some of these high value revenue streams such as marketplace, which accelerated nicely here, and supplier advertising and the like.",
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          "text": "Sure, Peter, everything else being equal, you would expect that to have a positive benefit to the P and L as GM items tend to carry a higher gross margin than many of the grocery items. So we look forward to being able to benefit from that. But some of that is on us and continuing to grow our assortment through our marketplace. But some of it is a very function of the economy overall and so we'll watch that closely.",
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          "start_time": "00:51:00,040",
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          "text": "Thank you. Our next question comes from the line of Peter Benedict with Baird. Please proceed with your question.",
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          "text": "Good morning everyone. Thanks for taking my question really just around. It's around competition I'm curious your observations, what you're seeing in terms of the competitive response to the share gains that continue to accrue to the business. I'm thinking primarily in the US but really any comments around that would be helpful. Thanks.",
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          "text": "Peter, this is Doug. I think the only thing that I would say is that the competitive set we focus on today is different and it's changing over time, probably at a more rapid rate than it used to. Being in China and Mexico recently, we have some strong competitors there and the ones we're focused on and learning from are different than the ones that we were focused on just a few years ago. Here in the US we have fierce competition from all kinds of different directions. So our mindset is to be aware, to watch, to learn, and when we see the customer responding to something, to react if it makes sense for us to react and to change if we need to change. So we try to stay focused, straight ahead, eyes on customers, members focused on our associates have our competitors in our peripheral vision, but study them and learn and apply. I think you can see that in some of our results today.",
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          "text": "Thank you. Our next question comes from the line of Karen Short with Mealy's research. Please proceed with your question.",
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          "text": "Hi. Thanks for taking my question and good to talk to you again. I kind of have two interrelated questions. So your OpEx at 21.2%, wondering what the potential is to get closer to 19% or get back to 19%. And obviously that's in the context of, you know, E. Comm as it relates to losses. And then the second portion is just with all these alternative revenue streams that you have, at what point are you looking at a materiality conversation?",
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          "text": "Thank you. Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.",
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          "text": "Karen, clearly those questions are for me. This is John David. We report. I'll take them in reverse order. We report on a segment basis right now and that satisfies the requirements that we have for segment reporting. So we'll continue to report out by international SAMs in US if something changes in our business, we'll reevaluate that in the future. On opex, there are a couple drivers. First of all in the current quarter to the increase and then I'll address your question related to where it could go. But in the current quarter, we saw a little bit more investment in marketing in the US Business and that's helping to drive some of the performance in general merchandise. So we're really pleased about that. The other is incentive payment for our frontline associates. We think it's important that our frontline associates are rewarded in the Same way that shareholders are. And as we've outperformed this year, we've seen additional incentive pay for them and that pressured SGA in the third quarter. The other element gets to I think the essence of your question, which is the changing mix of our business. If you look at SGA on a brick and mortar basis, it's less than what you have in digital channels. And so as we continue to grow digitally, as we continue to have more of our business that's coming through E commerce, you're going to see some pressure on SG&A. That said, the team here is very focused on continuing to try to provide everyday low cost to enable us to have everyday low prices for our customers. And so we'd love to get back to the 20% range on SGA. That requires work. But there's in any company, especially one our size, there's always opportunities for efficiencies and the use of technology to better serve our customers and members. So we're working on that. But you have to keep in mind going forward that as we get more digital you're going to see pressure on the SG and A line.",
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          "text": "Great. Good morning everyone. Obviously the strength in the quarter was broad based but I wanted to focus on the acceleration in average ticket in the U.S. i think that was the strongest in over a year. I am curious if that was impacted by the hurricane or if there's some other type of inflection that you're starting to see, you know, in basket size, maybe an improvement in GM or attachments. Is that also maybe a benefit of attracting that higher income consumer? Just any more context on that as we think about the run rate going forward. Thanks so much.",
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          "text": "Yeah. Morning. This is John. I think, I think everything you said, it does represent some of the improvements that we did see in the quarter. We did mention that there were some tailwinds from some one time events that happened the quarter. But the thing that I'm really proud of the team is we had the highest growth in units and food that we've seen in several years, which is great. Our general merchandise business as we mentioned, despite some deflation and low single digits to mid single digits range were positive comps. So the units outgrew that. It is all I think a reflection of starting with are we selling the things that customers want to buy during the season? They're in seasons are important. We ended October with a strong Halloween. So all those added up are Important. And the shift from, I'd say not necessarily from, but adding on digital business on top of our store business is helping us attract new customers and serve them well with the options that we have. The combination of both the product and the service offerings are working. The growth in the deliveries under three hours is impressive. The team's doing a great job with that and we need to continue that. We know customers are looking for both value and they're looking to save time.",
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          "text": "Thank you. Our final question this morning comes from the line of Greg Melick with Evercore isi. Please proceed with your question.",
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          "text": "Hi.",
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          "text": "Thanks guys. I wanted to follow up on the membership growth and what's driving that there and what sort of behavior you're seeing in terms of lift from people when they do sign up for Walmart plus in particular and what that flows through in terms of the importance of data and then using that in the new businesses.",
          "created_at": "2025-01-08T18:41:12.336017Z",
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          "text": "Hey, Greg, this is John. I'll start with Walmart Plus. Walmart plus is a really important part of the offer. As we said this morning, we have a clear strategy. Our results reflect the financial framework that we have laid out. The growth in E commerce is an indicator of where the customer is headed and Walmart plus is a great way for customers to amortize the cost of delivery over time. And so when someone joins the program, you know, we're focused right away on ensuring that we deliver their order on time when they ask for it, not ahead, not after, and that the order is full and it's complete with as few substitutions as possible. And when we do that, well, that opens up the ability for the business to talk to them about other things that are going on in their life, whether it's changing the tires on their car or helping them with a birthday cake. There are just so many things we can do in core retail that makes life easier, add a value for our customers. So this is an important part of the overall equation we mentioned. Results up over double digit in Walmart plus again, so good to see the momentum and you know, looking from here forward in this quarter in particular, it's about executing really well. We need to be really clear on our offer. We need to pull the orders on time without substitutions and we need to deliver to customers exactly what they're looking for. This is the time of year when families get together for meals and gifts and it's really important that we're there for them and we enable them to have the best season they can have.",
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          "text": "I'll just add from an international perspective, I Think when we think about membership, there's a bit of a spectrum. So if you think about in Chile, we actually have a loyalty program which allows us to have over 80% of our customers data. And then if you look at it in Mexico, we've just launched Beneficios which has allowed US to get 28 million members sign up, which allows us just to be a lot more personalised in the way that we show up for those members. Those are free loyalty membership programs right through to a paid membership where you're really bundling delivery capabilities. If you look at that, we're seeing growth across most of the major markets. But if I then just point to Sam's China, they've had membership income grow of over 30% and I think that is a testament to the quality of their CVP and how attractive that is to our customers. Not only the in club offering but also the ability to do convenience with like over 80% of their deliveries being under an hour. So we think about membership as a way of driving loyalty to create the ability to personalise, to have a richer, stickier relationship with our members and to bundle up the ability to do delivery which is something our customers are telling us is really important.",
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          "text": "Yeah, I think in Sam's club we had a 15.1% growth in membership income. But none of this is a gift, it's all an achievement, it's just hard work. John talked about execution. We are executing on our member value proposition which is value, it's assortment, it's great experiences and it's building that trust with the members so that you build a lifelong relationship with them them. We had some great results as you've heard in E commerce and in club, which we're really proud of and we've seen the outcome of that. So great inputs give you great outcomes and we've seen Digital penetration increase 400 basis points scan and go up 250 basis points and that's resulted in all time high memberships increasing plus penetrations up 300 basis points and our renewal is up 230. So you know, just really nailing those basics, listening to your members and giving them what they want gives you great outcomes.",
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          "text": "All right, I want to thank everybody for joining us today. We look forward to engaging with many of you in the coming weeks and months at investor conferences. I want to ask you to mark your calendars for our next investment community meeting which is on April 8th and 9th, 2025.",
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          "end_time": "01:02:37,480",
          "text": "Doug, really proud and grateful to the team and of the team, the folks that are in this room are leaders more broadly and our associates around the world. They're doing a nice job of delivering short term results, managing today and building for tomorrow at the same time so that we can continue this momentum. I think we are being appropriately aggressive as it relates to our level of investments, whether that's related to price or associate investments or automation, for example. And I'm really encouraged by the way folks are working together with our tech teams to build things in a way that's faster and more effective. We've got room to improve there, we probably always will. But when I look at what we're putting together, the combination of businesses, I think the outcome is one that can continue to grow the top line while growing the bottom line faster in a sustainable way, but while making the necessary investments as we work towards trying to serve people better. For decades, it's been my experience that our customers and members want four things from us. They want low prices. They want a really broad assortment of products and services. They want to have a great experience, and that includes convenience and saving them time. And they want to do business with somebody they trust. And in this business, you get what you earn. So we are working hard today to make sure that tomorrow we're continuing to have quarters like the one that we had this quarter. Thank you all.",
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          "text": "Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.",
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  {
    "call_id": "Eli Lilly Q3 24",
    "call_title": "Eli Lilly Q3 24 Conference Call",
    "symbol": "Eli Lilly Q3 24",
    "start_time": "2025-01-08T18:40:48Z",
    "end_time": "2025-01-08T18:41:17Z",
    "duration": 0,
    "status": "COMPLETED",
    "created_at": "2025-01-08T18:40:48.334111Z",
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    "transcripts": {
      "transcript_id": "b51f89ee-0345-41a1-99da-88b362c45a22",
      "call_id": "Eli Lilly Q3 24",
      "text": " Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q3 2024 earnings call. @ this time, all participants are on a listen only mode. Later, we will be conducting a question and answer session and instructions will be given at that time. Should you request assistance during the call, please press star then zero and an operator will assist you offline. I would now like to turn the conference over to your host, Joe Fletcher, Senior Vice President of Investor Relations. Please go ahead. Thank you, Paul. And good morning everybody. Thanks for joining us for Eli Lilly and Company's Q3 2024 earnings call. I'm Joe Fletcher, Senior Vice President of Investor Relations and joining me on today's call are Dave Ricks, Lilly's chair and CEO Dr. Dan Skavronsky, chief Scientific Officer and President of Lilly Immunology Lucas Montarse, Chief Financial Officer Anne White, President of Lilly Neuroscience Ilya Ufa, President of Lilly International Jake Van Narden, President of Lilly Oncology and Patrick Johnson, President of Lilly Cardiometabolic Health and Lilly usa. We're also joined by Susan Hedgeland, Mikayla Irons, Mike Springnether and Lauren Zuerki of the IR team. During this call, we anticipate making projections and forward looking statements based on our current expectations. Our actual results could differ materially due to several factors including those listed on slide 4. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10K and subsequent filings with the SEC. The information we provide about our products and pipeline is for the benefit of the investment community. It's not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non GAAP financial measures. Now I'll turn the call over to Dave. Okay, thanks Joe. In Q3, Lilly continued to make progress across the business. We delivered strong revenue growth, we advanced and expanded our pipeline and we invested in new product launches and continued expanding manufacturing Network. On slide 5, you can see details of our financial performance and progress related to our strategic deliverables. Revenue grew 42% after excluding the impact of revenue from the Olanzapine portfolio which we divested. In Q3 2023, new product revenue grew by over $3 billion led by Manjaro and Zepbound. US demand for Manjaro and Zepbound has been strong and continues to grow as we expand both access and supply. US sequential quarter over quarter prescription volume growth was 25% in Q3. All doses are available for order from Lilly in both the wholesale channel and Lilly Direct Pharmacy Solutions. The launch of a single dose zepbound vials in the US exclusively through LillyDirect's self pay channel further expanded supply and access in the quarter. And finally, we remain on track to exceed the production target of at least 1.5 times the saleable doses of increethen medicines in the second half of this year compared to the second half of last year. We continue to see strong performance across the balance of our portfolio in oncology, immunology and neuroscience. Excluding revenue from the Olanzapine portfolio, the non ankertin growth of the company was 17% in Q3. We achieved several key pipeline milestones this quarter, including the approval of evglis in the US for the treatment of moderate to severe atopic dermatitis, the approval of Kissunla in Japan and Great Britain for the treatment of early symptomatic Alzheimer's disease, disclosure of positive 176 week data from the CERMAT1 Phase 3 study of tirzepatide in adults with prediabetes and obesity or overweight and the recent presentation of positive Data from the Phase 3 Trailblazer Alt 6 study evaluating different dosing regimens for Donanemab Our manufacturing expansion agenda remains a top priority In September we invested nearly $2 billion to increase our manufacturing footprint in Ireland. This brings the total commitments to build, upgrade and acquire manufacturing facilities announced since 2020 to more than $20 billion. And beyond this $20 billion commitment, we also announced a separate $4.5 billion investment to develop the Lilly Medicine Foundry. This first of its kind facility will be dedicated to research and development for manufacturing process design and to develop high quality investigational medicines for our clinical trials. It will be located in Lebanon, Indiana, a short drive from the corporate headquarters. This investment underscores our confidence in our pipeline and the urgency we bring to bring our medicines innovative medicines to patients around the world. In August, we closed the acquisition of Morphic Therapeutics, adding oral Intragan assets to our early phase immunology portfolio and lastly, we returned over $1.6 billion to shareholders via dividends and share repurchases. On slide 6, you'll see key events since our Q2 call, including the milestones I mentioned earlier and several other key updates. Last month we appointed Lucas Montarse as Lilly's executive vice president and chief financial officer. Lucas has 23 years of experience at Lilly and has worked with the executive team and the board for a long time. So congratulations Lucas. Now let me turn the call over to Lucas to review our Q3 financial results and provide an update on our 2024 financial guidance. Thanks Dave. Slide 7 summarizes our financial performance in the third quarter which is highlighted by strong revenue growth across our new products as well as our non Incretin medicines. As Dave mentioned, revenue grew 42% after excluding the impact of revenue from the Olanzapin portfolio and was primarily driven by Mounjaro and Sebum. Revenue from our non incretin portfolio grew 17% after excluding the impact of revenue from the Olanzapin portfolio. Gross margin as a percentage of revenue increased to 82.2%. Gross margin primarily benefited from favorable product mix and higher realized prices partially offset by the sale of rights for the olanzapin portfolio in Q3 2023 and higher manufacturing cost. R&D expenses increased 13% driven by continued investment in both our early and late state portfolio. We recognize $2.8 billion of acquired IPRND charges primarily related to the acquisition of Morphic Therapeutics. Marketing, selling and Administrative expenses increased 16% primarily driven by promotional efforts supporting ongoing and future launches. Operating income increased to nearly $1.8 billion driven by higher revenue from new products partially offset by operating expenses growth. The effective tax rate was 37.6% reflective the unfavorable impact of non deductible acquired IPRND charges. Other than the impact of acquired iprnd, the underlying tax rate was consistent with previously provided guidance. We delivered earnings per share of $1.18 up from $0.10 in Q3 2023 and this includes a negative impact of $3.08 from acquired IPRND charges. On slide 9, we quantify the effect of price rate and volume on revenue growth. US revenue increased 46% with volume growing 35% driven by Zeban and Montjaro, partially offset by declines in Truly cities. Realized prices increased 11% in the U.S. primarily driven by Trulicity, Humalog and Verzenic while Mounjaro and Zeban demand remains strong and growing quarter by quarter. Revenue growth in 2024 has been impacted by supply and channel dynamics as we highlighted in Q2, increasing supply led to higher shipments that allow us to fulfill the majority of wholesalers back orders serving as a tailwind to sales. In Q3 we saw channel inventory decrease as wholesalers continue to navigate the complexities of high volume cold chain products across a dozen different dose and brand combinations. We estimate this inventory decrease impacted Q3 sales of Mounjaro and Sepan by mid single digits as a percentage of aggregate used sales of these products Europe revenue grew 39% in constant currency when excluding the impact of the divestiture of the Olanzapin portfolio. This growth was primarily driven by Mounjaro, Versenio and Jardians. We continue to be pleased with the Mounjaro equipment launches in Europe and have now launched in the uk, Germany, Spain and most recently Italy. Revenue in the rest of the world grew 45% in constant currency driven by volume growth of Mounjaro and to a lesser extent strong performance of Versenio and Jardians. Moving to China, revenue increased 17% in constant currency. This increase was driven by volume growth of Tybit and favorable pricing impacts for Humado. Finally, Japan grew 17% in revenue, cost and currency volume growth of 20% was driven by uptake of Mounjaro, Persenio and Jardiance. Slide 10 provides additional perspective of performance across our product categories. Mounjaro sales were $3.1 billion globally with almost 2.4 billion of net sales in the US. We continue to see solid uptake of mounjaro outside the US with sales in Q3 totaling $728 million. Barsenio continues its growth trajectory with worldwide sales increasing 32% driven by strong execution in the early breast cancer indication Jaipirka. Worldwide revenue was $81 million when excluding the impact of Japan collaboration milestones recognized in Q2. Jaipirca continued its sequential quarter over quarter growth trend demonstrating sustained uptake in both the MCL and CLL patient population worldwide. Onboard revenue increased to $41 million. We are pleased with our progress gaining commercial access for ombo in the US as of January 2025 we will have first line access at 2 out of the 3 major PBMs. We were also excited to receive US approval for Kizonla and EPGLIS in Q3. The Kisanla launch is underway and progressing and the EPLIS launch began early this month. We are pleased to have already secured formulary access for Epilis with one of the major PBMs worldwide. Trulicity revenue declined 22% driven by lower volume partially offset by higher realized prices. Slide 11 provides an update on the US launch of Zipboard. We continue to see strong growth trends leading to sales of over $1.2 billion. We have broad formulary coverage for Setbound as of October 1st. Setbound has approximately 87% access in the commercial segment and we are making ongoing progress expanding our employer Opt Ins. We are in the early days of launching single dose Sepban vials in the US exclusively through Lilly direct 2.5 and 5 milligram single dose vials are currently available to self pay patients at a 50% or greater discount compared to the list price of other incretin medicines for obesity. This offering helps even more adults living with obesity access setbone including Medicare beneficiaries and those without 12th we provide an update on capital allocation on slide 13 you can see our updated guidance for the full year we are updating our revenue guidance range to $45.4 billion to $46 billion. The new midpoint range represents approximately 50% growth in Q4 2024 compared to the same quarter last year, demonstrating a continuation of revenue growth acceleration. We are investing heavily in increasing supply of Tirzepatide and have been carefully balancing our demand creation activities and launches into new markets with our production to support continuity of care for patients in Q3 we continue to be prudent scaling up and demand generation activities. This is the driver for lowering the top end of the range. We continue to expect that we will exceed our goals to increase production of incretin sellable doses by at least 50% in the second half of 2024 compared to the second half of 2023. Now, with all the doses of Mountjaro on sepan available, we will accelerate demand activities and while there is a lag to flow through revenue, we expect to see the impact of these efforts in Q2 and into 2025. Lastly, we are also expecting new Montaro launches internationally to contribute to growth in Q4. Our expected ratio of gross margin less OPEX divided by revenue remains unchanged on both a reported and a non GAAP basis. Other income and expense is now expected to be in the range of 425 to 325 million dollars of expense on a reported basis and is unchanged on a non GAAP basis. We have updated our estimated effective tax rate to be approximately 17% driven by the impact of non deductible IPR and D in Q3. EPS is now expected to be in the range of $12.05 to $12.55 on a reported basis and $13.02 to $13.52 on a non GAAP basis. Both ranges reflect the updated mentioned earlier as well as acquire operating iprnd charges through Q3 of approximately $3.1 billion. Now I will turn the call over to Dan to highlight our progress on. R and D. Thanks Lucas Lilly R and D had another productive quarter. Let me begin by sharing some late phase updates including some exciting Phase three data that we shared at recent medical congresses. Starting with Neuroscience Yesterday at the Clinical Trials in Alzheimer's Disease conference, we were pleased to share positive results from our phase 3 Trailblazer AL6 trial which evaluated different dosing regimens for initiation of dnenamab treatment to understand their effect on ARIA E. In this trial we tested a modified titration which shifted one vial of dinenumab from the first infusion to the third as shown on slide 14. We designed this modified titration to achieve identical total dose of Dunedamab administered in the first three months as does our standard dosing regimen, but we hypothesized that the smoother increase in dose could result in less rf. We are pleased to see in this trial that indeed by pharmacokinetic analysis we achieved equivalent cumulative exposure between the modified titration and the standard dosing regimen and as a result we achieved similar levels of amyloid plaque removal and phospho tau217 reduction. Importantly, we also confirmed our hypothesis on ARIA and showed that the modified titration reduced the incidence of aria E to 14% compared with 24% for those receiving the standard dosing regiment. As well, lower frequency of symptomatic RAE, lower radiographic severity of all categories of ARIAE and lower ARIAE in APOE 4 genotype carriers was observed using the modified titration as compared to the standard dosing regimen. We plan to submit a supplemental BLA to the FDA in the coming weeks for this modified titration. Our efforts on rimturnatug continue to progress and we're starting a phase three efficacy study of rimturnatug focused on a preclinical stage of the disease, similar to our ongoing Trailblazer ALS3 trial for Dunenumab, where we are trying to reduce the risk of progression to symptomatic Alzheimer's disease. In this upcoming phase three registrational trial called Trail Runner 3, we are evaluating a fixed duration of monthly subcutaneous administration of offering what we see as a potentially convenient option for this earlier patient population. We'll share more details about the Study design of Trailrunner 3 tomorrow at CTAD. Turning to CardioMetabolic health Last month we shared data from our remaining phase three studies for our weekly basal insulin called insulin Escentaura Alpha. As a reminder, the phase 3 consists of five global registration studies, four of which are in adults with type 2 diabetes and one is in adults with type 1 diabetes. We are pleased that each study met its primary endpoint of non inferior A1C reduction versus insulin glargine or insulin deglodeq, which are the most frequently used daily basal influence in the studies evaluating EBCITOR in people with type 2 diabetes. The results demonstrated that EFCITOR achieved meaningful A1C reductions with relatively low hypoglycemia rates. We were particularly excited with the results for Quint 1 in which EPSOTORA was administered via fixed doses using a single use autoinjector. In this 52 week study in people with type 2 diabetes, Epsilon lowered participants A1C by 1.31% compared to 1.27% for insulin glargine. This impressive A1C reduction was achieved with low hypoglycemia rates. Actually, escitora had approximately 40% lower rates of severe or clinically significant hypoglycemia than did daily insulin glargine. These data highlight the power of an easier to use dose form of a weekly insulin for people who are just initiating basal insulin therapy for the first time. We look forward to discussing the results from the Quint Phase 3 program with global regulatory agencies. It has also been a productive quarter for our late phase incretin programs. First, as shown on slide 15, we shared positive 176 week data from the Surmount 1 Phase 3 study of tirzepatide in adults with prediabetes and obesity or overweight which demonstrated a remarkable 94% reduction in the risk of developing type 2 diabetes. This is the longest duration tirzepatide data to date and and we are highly encouraged to see that patients on the 15 milligram dose achieved sustained weight loss of nearly 23% during a more than three year treatment period and that this weight loss was accompanied by a significant reduction in risk of developing diabetes. We look forward to sharing the detailed results next week at Obesity Week. These results add to compelling data showing the benefit of the combined pharmacology of dual GIP and GLP1 receptor agonism in several obesity related complications including type 2 diabetes, metabolic dysfunction, associated steatohepatitis or MASH, moderate to severe obstructive sleep apnea and heart failure. We are working quickly to bring tirzepatide to more adults living with obesity and its complications and we are pleased to share that we expect U.S. regulatory action for tirzepatide in adults with obesity and obstructive sleep apnea yet this year and that we will submit for U.S. approval tirzepatide in adults with obesity and heart failure with preserved ejection fraction before the end of this year. Another avenue to advance patient care is the maintenance of body weight reductions. We're conducting two Phase 3B weight loss maintenance trials. The first is Surmount Maintain which compares either tirzepatide 5mg or tirzepatide maximum tolerated dose to placebo. The second is Attain Maintain which evaluates our oral GLP1 or for glipron versus placebo after tirzepatide or semaglutide in participants who complete surmount 5. The 3B head to head study of tirzepatide versus semaglutide. We look forward to sharing the top line data readout for CMOT5 later this year. Next, in oncology, the phase 3 EMBER3 study evaluating our oral SIRD imlunestrant in patients with second line ER positive HER2 negative metastatic breast cancer was positive. The study evaluated three arms imlunestrant as a monotherapy investigator's choice of endocrine therapy monotherapy and Imlanestran in combination with abemaciclib. Based on the results from this trial, we expect to submit an NDA to the FDA by year end and we look forward to sharing detailed results at an upcoming medical meeting. The phase three portion of the olomirasib first line KRASG12C lung cancer study is now underway. The first phase three trial for this class of medicines in newly diagnosed locally advanced or metastatic lung cancer regardless of PD L1 expression. This comes after recently defining the dose of the medicine in combination with standard of care regimens in consultation with the FDA under Project Optimus. We continue to believe we could have a leading agent in this class and look forward to execution of the late stage program. Finally, in immunology we're cited by the recent US FDA approval of lebratizumab as EBGLIS for adults and children 12 years and older with moderate to severe atopic dermatitis. EBGLIS provides a new first line biologic treatment that targets a main cause of eczema inflammation that offers significant early skin clearance and itch relief with convenient once monthly maintenance dosing following the initial phase of treatment. We recently shared compelling long term data showing that lebrikizumab provides sustained disease control for up to three years in more than 80% of patients with moderate to severe atopic dermatitis who responded to epcos treatment at 16 weeks. We have also initiated two phase three studies of leprikizumab in adults with perennial allergic rhinitis and chronic rhinositis with nasal polyps. As we continue to expand our immunology portfolio to help more patients. We're conducting two phase three studies evaluating ixekizumab and tirzepatide together in patients with obesity or overweight and either psoriatic arthritis or moderate to severe plaque psoriasis. Obesity is associated with an increased risk of developing autoimmune diseases and can negatively impact disease outcomes. TULPS has already demonstrated strong efficacy in treating psoriatic arthritis and plaque psoriasis, and we are excited to see the potential for additional benefits for patients when combined with the significant and sustained weight loss offered by Zepbound. Slide 16 shows select pipeline opportunities as of October 28 and Slide 17 shows potential key events for the year. I've already covered our late phase progress, so now I quickly cover updates for the early phase pipeline. Starting again with neuroscience, we recently initiated a phase two study of an epiregulin antibody in chronic neuropathic pain associated with distal sensory polyneuropathy. We'd previously shown this molecule in phase one of the pipeline as an undisclosed mechanism in pain. We also have begun phase one studies on two new neurodegeneration assets, an alpha synuclein directed SIRNA and a Tau directed Sirna. Earlier this morning at CTAD, we disclosed detailed results from our phase 2 study of separate Rhognostat are oral Oglik nakase anti tau agents. While neither does slow clinical decline in early symptomatic Alzheimer's disease, biomarker data suggests potential impacts on tau pathology, brain volume and neuroinflammation safety follow ups for the study are ongoing. Turning to cardiometabolic health in the coming days, we will initiate a phase 2 study of alura Lintide, our long acting amyloid receptor agonist for chronic weight management in combination with tirzepatide in patients with type 2 diabetes and a phase 2 study of bimagramab alone or in combination with tirzepatide for chronic weight management in participants without type 2 diabetes. We will also be advancing Volan relaxin, our long acting relaxin molecule, into phase two in adults with chronic kidney disease. We removed the Phase I Apoc3 Sirna asset in cardiovascular disease as it did not meet our bar for continuing clinical development in oncology. 2024 continues to be a very productive year for new clinical starts. Since the last call, we advanced three new molecules into phase 1 studies, our oral SMARCA2 or BRM inhibitor, our KRAS G12D inhibitor and our pan KRAS inhibitor. These three initiations bring the total new clinical starts in oncology in 2024-7, exceeding the goal we shared earlier this year to put at least five new potential medicines in the clinic, and we've done that across three different modalities, emblematic of our strategy to utilize therapeutic modality diversification to combat treatment resistance and improve patient outcomes. We expect this new slate of clinical programs will set us up for an exciting 2025 as we look to see which programs deliver differentiated and important early clinical data sets for finally, in early stage immunology, we're also excited to initiate several new Phase 2 studies. First, we moved DC853, an oral IL17 inhibitor, from the Dice Therapeutics acquisition, into Phase 2 in adults with moderate to severe plaque psoriasis, and we removed DC806 from the pipeline in favor of 853, which is a more potent molecule. Second, we are initiating a phase 2 study combining Altrecobart and miracizumab in adults with moderately to severely active ulcerative colitis. In addition, we are terminating the phase 2b study of parasolumab in rheumatoid arthritis due to the overall benefit risk profile of the molecule in this study. Finally, after welcoming our morphic colleagues to Lilly in August, our pipeline now Reflects the oral alpha 4 beta 7 integrin inhibitor morph 057 in phase 2 for moderate to severe ulcerative colitis and moderate to severe Crohn's disease. Q3 was an exceptionally productive quarter for Lilly R and D, and we're pleased with our important progress we're making for patients across all of our therapeutic areas. Now I'll turn the call back to Dave for closing remarks. Okay, thanks Dan. Before taking questions, let me briefly summarize our progress in the quarter. We had strong revenue growth across both Manjaro and Zeppelin, as well as our oncology, immunology and neurosciences medicines. Significant advancements in our pipeline included approval of evglis for moderate to severe atopic dermatitis in the us, Kisunla for early symptomatic Alzheimer's disease in Japan and Great Britain, and positive data disclosures for phase 3 studies of tirzepatide and adenumab. We are confident in Lilly's bright future. We have now launched in major geographies the cohort of medicines that we expect will serve as the driver of our growth through the balance of this decade, that is Manjaro, jperka, Omvow, Zepbound, Kasunla and Eblis. We expect these products, together with our already launched products will contribute to strong growth of the company in 2025. In addition, we plan to continue to scale R and D and step up our investment across manufacturing and commercial to support the successful launches of these medicines to help even more patients next year. So now I'll turn the call over to Joe to moderate the Q and A session. Thanks Dave. We'd like to take questions from as many callers as possible, conclude our call in a timely manner so consistent with prior quarters. We'll respond to one question per caller. So I ask that you limit to one question per caller as we will end the call at 11am if you have more than one question you can re enter the queue and we'll get to your question if time allows. So Paul, please provide the instructions for the Q and A session and then we're ready for the first follow. Certainly at this time we will be conducting a question and answer session. If you have any questions, please press Star one on your phone. At this time. We ask that participants limit themselves to one question on today's call. If you do have a follow up question, please rejoin the queue by pressing Star one at anytime. We would also ask that while posing your question you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. The first question today is coming from Chris Schott from JP Morgan. Chris, your line is live. Great. Thanks so much. Just to kick off the questions, can you just help bridge a bit from the 3Q sales we just saw reported to the 4Q implied results? It's obviously a substantial step up in sales. Sounds like part of this is you're now accelerating demand generation efforts given the improved capacity, but I was just hoping to get a little bit more color on exactly what those efforts are and how quickly you expect those programs can. Translate to an acceleration in prescriptions. Thank you. Thanks Chris for the question, I'll maybe hand over to Patrick since I'm guessing a lot of the question is around Tirzepatide related, but let Lukas jump in as needed. Patrick thank you very much Chris. I think it's first important to emphasize that the overall performance and health of both Mounjaro and Setbound are very strong and we saw a slightly accelerated growth in Q3 of more than 25%. And also the market, the underlying market for both type 2 and obesity continues to grow. We took a more prudent approach than we anticipated in Q3, pretty much driven by the need to deliver a good consumer experience that has been one of our triggers for any investment. Based upon the experience we faced in the first half of the year when a lot of the calls to our customer service center was about supply, actually more than 20%. We are now down to less than 1% of those being supply related. So what we are doing right now is that we are investing heavily in our DTC effort, which we haven't done in the past. Both supply allows us to invest strongly there, but it's not a demand issue. And similarly we're fully leaning in on all the HCP promotional efforts, also providing samples in the marketplace to provide us. So we remain very confident based upon the underlying trend in the marketplace today and also the growth of both Setbound and Mounjaro in terms of trx, MBRX and TRX that we are up for a good few for. Maybe just to add to that. Thank you Chris, for the question. When you look at the Midpoint that I mentioned, 50% growth that we expect for the fourth quarter compared with the 42%, it's a step up of 8%. When you remove the channel dynamics that we alluded in Q2, the step up of growth is very consistent throughout the quarters. So the acceleration and the drivers are the ones that Patrick mentioned. Maybe just to add to that OUS as well, we continue to advance and get new countries that we are going to be launching Mounjaro as well. That will drive that part of that growth acceleration in the fourth quarter. Thanks, Paul. Next question. The next question will be from Jeff Meacham from Citigroup. Jeff, your line is live. Hey guys, thanks for the question. I guess related to that, I just. Wanted to dig into the 3Q volatility. I mean, Dave, you mentioned the scrip demand sequentially. I guess so given that, why would you see such a big drawdown this quarter? I guess investors are trying to figure. Out if the sequential trends are perhaps a leading indicator of a moderation demand. Or if it's just the lumpiness of the rollout in excess. Thanks, Dave. You want to feel that? Yeah, maybe because it's kind of a macro thing you're asking there. I think first of all there is a lot of lumpiness in channel stocking. I think all the sell side analysts on this call have probably struggle with that as we have, you know, exiting Q1. We can recall that we had a number of our dosage forms on backorder and we pretty much reached a nadir of supply and the wholesalers that was restocked in Q2 and then we saw a drawdown in Q3. I think what we really don't control and don't attempt to but is a reality is that downstream customers from Lilly wholesalers and retailers are making their own decisions about which of the 12 different dosage forms they want to stock and at what level. There are some physical constraints to that cold chain capacity is constrained and there are financial constraints working capital that they're managing to. Those are their decisions to maintain their customer service levels. I think what we've done is sort of move our set point of how much stock we want to have on hand before we go initiate demand stimulating activities which we had more or less paused from Ajaro in the first half and never started for Zepbound remembering we launched in December of last year. So I think in market data you guys can all read and you see Jeff yourself, and we do see acceleration of both brands in Q3 over Q2 in actual consumption. And our estimate is that will continue or accelerate as we add US stimulation to that demand, which as Patrick said, we're going to begin doing here really mid November in earnest ex US Demand is another factor that affects sales and that too we moved out launches by about a quarter just to make sure we had enough buffer so when customers wanted a prescription, they could get it filled reliably. And I think that's an important thing for us to keep that trust going forward. So, you know, at a macro level, is there a demand problem here? No, actually. Is there a supply problem? No. Although if we had unlimited demand, there would be. So we're carefully gating those two things together as we escalate supply in Q4, which as I mentioned, we're going to beat the 50% growth number. You'll see us grow our demand stimulation as well. And I think that's really about Q4, but even more about Q1 of 2025 and continuing acceleration there. So business is super healthy. We feel good about where we are. Obviously, you know, there was some choppiness this quarter, but I think underlying growth here is as strong as we would have hoped. Thanks, Dave Paul. Next question. The next question will be from Evan Segerman from BMO Capital. Evan, your line is live. Hi guys. Thank you so much for the question. And Joe, congrats on your new job. I want to touch on compounding. Given the headlines, do you believe that compounded drugs are impacting demand? And secondarily, how do you frame kind of the FDA's waffling on the shortage list as it relates to compounding? It seems that this has been a hot button issue. I'd love your perspective. Thank you so much. Thanks, Evan. Yeah, Hot topic indeed. Maybe in terms of talking about whether there's a financial impact where you see that. Let Patrick feel that and then maybe the broader question around the fda. I'll let Dave chime in. So, Patrick. Well, thank you very much, Evan. I think, as we all know, that it's not one reliable source when it comes to quantifying the compounding market. We also know that it's opaque and mainly cash. And there are probably reasons to believe that some of those patients are off label. So from our perspective, we actually don't estimate there to be a huge financial impact of compounding on our business. But our major concern here has been driven by safety. But thousands of people in the US Are getting medicine that is not approved by the FDA for quality, safety, or efficacy purposes. So that has been our concern. And we are mainly leaning in now, as we said earlier, to drive demand in the US marketplace for patients with obesity and type 2 diabetes. Yeah, I mean, I can't really speculate too much what's going through the FDA's mind, but I think other commentators have mentioned that the longer this goes on, the more risk they have to their own regulatory framework. So my guess is the FDA is concerned about that and they want to win this case and they're putting their ducks in a row to do so. There is an alternate, I guess, perspective that they don't care, but I think they do care. The other thing I'll say is we work closely with the FDA to approve new capacities. And it's important to note here we could do more with them and we communicate this to them directly. They're not hearing anything here. They haven't heard from me already. But we have invested massively in parenteral filling capacity and API capacity. And a big part of the delivery schedule for that, which can take two and a half to four years, is actually the regulatory process itself. So it's difficult to think about a world where the workaround to that is to unleash unregulated product. The workaround should be to collaborate with the companies to speed up legitimate product delivery. And we would embrace that discussion fully. We have a lot of things in queue now at the FDA or about to be, that could speed up what already is an impressive production ramp. We would welcome that opportunity. Thanks both. Paul, Next question. The next question will be from Seamus Fernandez from Guggenheim. Seamus, your line is live. Oh, thanks. My question is actually on how you feel the compounding situation could be resolved by the availability of an oral small molecule that can be provided at substantial scale. It Seems like this is the easiest and most straightforward answer to the compounding crisis. Once that occurs, does it make sense with that availability regardless of product, that the agency would move to resolve the crisis? Or is this a product by product situation such that if Novo can't get their house in order in that context, that we'll end up with having this compounding issue just draw out over time. Thanks. Thanks Seamus. Yeah, I'll hand back to Dave, although if you're referring to our of course our oral GLP1 non peptide agonist or forglipron, I mean that's still a ways away from the phase three turning over and then ultimately coming to market. But Dave, maybe what would you add to your prior comments? Yeah, well, I mean in the long run of course there's a potential billion customers on the planet and I think we've said, I've said that probably the only way that a big chunk of those are served well is with oral products because of the production system efficiencies there versus parenteral filling of proteins. So it's important, of course we're in the lead there and we want to see our foreground be successful, but we need the data and then submission and launch would put that sometime something like less than two years from now. But first of all, I wouldn't characterize compounding as a crisis. It certainly isn't one for us. I think the problem is people are being harmed and duped and so that's kind of what we'd like to see stop. But as Patrick said, we don't really see a financial impact on Lilly of compounding. I think as an industry we should probably be worried that if this grows and is allowed to continue then it sort of creates us backdoor generic world. But as I said, I think the FDA wants to stop that for good reasons, for public safety reasons, and they'll do that. At the end of the day, FDA views this as a product by product analysis and right now Tirzepatide is not in shortage and therefore for mass compounding should not be permitted. There's a stay, et cetera in the court, but we think that should be the state there as it relates to semaglutide. You'll have to ask Novo that. Although we're working hard to help Novo with their supply problem by reducing demand for semaglutide and increasing impurtious appetite. So maybe it'll resolve that way. Thanks, Dave. Paul, next question, the next question will. Be from Mohit Bansal from Wells Fargo. Mohit, your line is live. Great. Thank you very much for taking my question. Maybe if I can ask the demand question and supply question differently. So now you will be starting some. Demand generation activities in the latter part of the year. How are you thinking about the access side of it? Do you think that there is some convergence between access, demand generation and supply into 2025? Because we are hearing that some of. The payers are restricting it even more now. So we'd love to understand your thoughts on access side given that you are probably have done the negotiations at this point. Thanks Mohit. I'll hand over to Patrick to talk. About maybe AHCS updates and go forward. Maybe just a few comments with Bonjaro prior to moving into cef. I think with Bongiaro we have really good Access and it's 93% and I think pretty much where we need to be across commercial and Medicare in terms of setbound, I think we have made progress in record time here, close to 90% commercial access and we continue to see improvement. In terms of employers opt in, you're correct. We hear stories about some employers opting out but the major trend is actually in favor of opting in to the anti obesity medications. We are definitely north of the 50% and I think we will have some new Data in the first part of 2026 since most of the employees are making those decisions effective 1:1 in the new year to come. So I think we're very very optimistic in that part of our business. But we're also continuing to make progress in terms of access for Medicaid and just since we connected last time we have gained 6 incremental states for Medicaid and most recently effective 10 1. We have California and Massachusetts. So big states are now covering more than 30 million lives and we expect to continue to make progress in that space. And lastly, I would just emphasize the potential approval here of obstructive sleep apnea. The approval of obstructive CD apnoea will help us with employer opt in because we know that outcome studies are critical to convince employers. But on top of that it also opens up the door for access in Medicare and with the decision that CMS announced back in April this year, we are confident that we will gain access both of OSA and Medicare. So I think we have many reasons to be excited about the outlook for 2025 driven by improved access across the commercial America space as well as the investments we have done with Lilly Direct. Thanks Patrick and Mohit, even though you didn't ask about OUS access and I don't allow multipart questions. Maybe I'll see if Ilya wants to chime in and talk a little bit about OUS access progress to date and what we see going forward. Ilya, would you like to chime in on that? Sure. Overall we have seen significant progress on our launches OUS. We have both access for type 2 diabetes. We're in some of the markets like UK, Germany and Japan and we're seeing some good progression of our share in those markets where we're already seeing leading share of market in new patient starts in those places. Of course we need to continue to develop access in other markets and then on the chronically management side we feel good about the prospects of adding countries to drive access. At the same time there's also developed self pay markets like the uk, UAE and Saudi or seeing significant progression of our share and penetration where we actually have leading share of market in TRX in these markets. And we continue to focus on both developing the self pay but also increasing access for both type 2 diabetes and chronic weight management over time and that will be gradual as we enter new markets. Thanks Celia Paul. Next question. Next question will be from Terence Flynn from Morgan Stanley. Terrence, you're line us live. Great, thanks for taking the question. I was just wondering, I know you've already framed out kind of where supply would be for the second half of this year. Again as we look out to 2025, can you give us an early read on how your supply capacity efforts have been progressing and how we should think about the amount of new capacity, especially on the auto injector side that you can bring on for 2025? Thank you. I can start. Lucas, jump in. I mean we'll have a chance to lay out that as we did this year in our guidance call in early February, but qualitatively you can see the flow of our investment and capex into this space and you could kind of go backwards three years or so and expect the capacities we announced then to be coming on full line in, in that time frame and then, you know, rolling that forward. So of course we made announcement this year and those are a couple years away from having full impact. But if you go back to 21, 22, 23, we are working hard to bring those online and expect good growth next year. So I think Lucas mentioned we're seeing acceleration in demand but that means acceleration in supply during this year and we expect strong, strong growth on the total for next year. And we'll lay out the details when we get into the guide column. If you have anything else to add to that, Lucas? Maybe just one comment from my side when we talk about more so from the demand perspective. I think in the US in particular the proxy that we alluded to on the growth that we see across both Montaro and Sep bounding TRX of that 25% sequential quarter on quarter is a good proxy to start basically trending out into next year. More so to provide more perspective from the market side and the demand side than the manufacturer. Thanks both Paul. Next question. Next question will be from Umar Rafat from Evercore isi. Umar, your line is live. Hi guys, thanks for taking my question. Maybe just to spend one more minute on the inventory dynamic in the quarter. I'm trying to think out loud. Could the launch of CashPay single vial option via Lilly Direct have impacted channel's interest in filling out their inventory given how the launch is going and or were there any changes in your incentives or fees to the distributors that could have impacted it? Thank you very much. Thanks. I'll let Patrick quickly handle that. Well, overall we launched the Lilly Direct Self Pay file just a month ago. We are pleased with the uptake, but we also realized that it takes some time the healthcare system to adopt the self pay in their EMR systems. But so far I would say that the impact of TRX has been quite limited and what we defined as being at the low single digit level. We expect Lilly Direct Self Pay though to be a very important channel to grow. New therapy starts moving forward but not significant in Q3. I think a short answer to both questions. No and no. We didn't change our terms and I don't think we see any change in retail stocking of the auto injector because the vials are failed. Thanks Umer. Paul, next question. The next question will be from Steve Scala from TD Count. Steve, your line is live. Thank you so much. For a product with a seemingly unlimited market opportunity, what appears to be great market awareness and persistent supply shortages, DTC for Zepbound really shouldn't be necessary, particularly now. DTC in my experience usually signals concern about patient volumes, awareness or competition. So the question is, if DTC were not instituted, what would be the trajectory of Zepbound over the next, say 12 months? Would consensus be achieved? And if competition is the concern, Are you getting ahead of Kagarcema Data due out soon. Thank you Chair Powell. That's a lot to unpack. Steve, I don't think we're going to speculate around a hypothetical demand curve, but maybe. I think Patrick kind of touched on this in his first answer with regard to why we're doing DTC now, maybe just reiterate that point very briefly. Patrick, around. Yes. You know what? I think we are comparing a very different market. 1H25 versus the second half of 2025. We face some significant supply constraints and it wouldn't be responsible for us at that point in time to drive any major DTC investments and just provide consumers with a bad experience at the pharmacy level. We have much more confidence now in terms of the supply moving forward and this is not a demand issue problem. It's actually just a supply opportunity and we want to drive up that consumer awareness. So why we're doing extremely well. We just need to have in mind that the penetration in terms of obesity is just at the low single digit level, 4 to 5% and there is still a huge stigma. So whatever we can do here to drive patient activation is going to serve us very well moving forward. I would just add that actually unaided awareness for zepbound, although we're everyone on this call is highly aware of the brand name is actually not very high and that we launched this drug almost a year ago and have done no advertising. So I think it is time to introduce the brand and so people are aware of that when they speak to their doctor. Great. Thank you, Paul. Next question. The next question will be from Dave Reisinger from Larynx. Dave, your line is live. Yes, thanks very much. A number of my questions have been asked. So with respect to parasolumab, I'm hoping that you could just provide a little bit more color. You mentioned that it was dropped due to the benefit risk ratio, but did you see any specific safety problems? And what is your view of the opportunity to develop another PD1 agonist for INI disease in the future? Thank you. Thanks, Dave. And I was getting worried that Dan wouldn't get a chance to speak on the Q and A. So maybe I'll hand this over to Dan for his thoughts. Good. Thanks for your concern, Joe. And thanks for the good question, Dave. Yeah, I mean, parasolimab was a really interesting mechanism for us and we were excited when we saw the phase 2a data. It was a small number of patients, but had a relatively profound effect on RA symptoms, particularly in patients who had failed a previous biologic. So we sought out to replicate that in a larger phase 2b study. Unfortunately, when we came to the end of that study, the benefit risk that we'd seen in the phase two a study was not fully borne out in phase IIb. So just based on the overall profile, which includes both the efficacy and the safety of the drug, we decided not to pursue that. I see a question on the follow on PD1Agonist. We don't have one that we're pursuing right now. So that's what I'll say about that. And I think of course we'll look forward to presenting the full data package at a future meeting. Thanks, Dave. Thanks, Dan. Paul, Next question. The next question will be from Kerry Hallford from Berenberg. Kerry, your line is live. Thank you very much, Kerry Holford Berenberg, My question actually on Visenio, please. So your competitor in this space, Novartis Kiskali, recently received a broad approval in early breast cancer, which obviously includes the high risk patient group. So I would just be interested to hear you speak about your expectations for market share evolution in that space, how you protect your position with Visenio in the high risk setting and then also if you can talk to the impact of IRA that you expect on that brand as you move through Part D reform next year and whether or not you expect the drug to be on the negotiation list for 2027. Thank you. Thanks Carrie. Sort of a two part question, but I'm excited to ask Jake to chime in and maybe talk about presenting on the potential Kiskali impact as well as ira. Jake? Yeah, happy to take it. Thanks for the question. Our position and expectation here around market share with respect to the adjuvant setting for Fresenio versus Kiskali hasn't really changed sort of pre approval versus now. I think we have a very robust clinical data package with a lot of follow up on our data set which is critically important for prescribers and a two year regimen where patients can finish their adjuvant therapy and move on with their life, hopefully remaining recurrence free. That's a pretty compelling proposition. It has been and I think is recognized as such in a variety of treatment guidelines that for the high risk population, the Monarch E patient population, prefer Verzenio over Kaskalia standard of care. Those expert guidelines have weighed in over the past couple of months. I don't expect that to change materially. Of course, with a new market entrant, the percentage of patients in this setting who get any CDK4.6 inhibitor as adjuvant therapy could go up and that would benefit us. And I expect that there will be some patients for whom Kiskale is a more appropriate choice. But I don't expect it to be a significant shift in our overall market dynamics. And of course the node negative population is not where we're indicated and not where we're used. And that's a story for them to tell. On the second part of your question around part D reform, it will have an impact, of course there's a push and pull here on the amount we have to contribute for catastrophic coverage being a downside. And of course the copay cap out of pocket cap on patients, particularly in Medicare where that could be a tailwind on the brand, I think it's hard to know exactly where that will net out. It probably nets out sort of in the neutral range. I don't think it'll end up being a headwind or a tailwind sort of in totality. But we have to see how that shakes out. On the last part of your question around negotiation list, I don't want to speculate on that. I don't think we have enough information yet given the evolving nature of all of the different medicines that could be up for negotiation to actually say one way or another which ones will be there just yet. Thank you, Jake. I know we're running short on time. So Paul, maybe just two or three more questions. Next question. The next question will be from Chris Shubhutani from Goldman Sachs. Chris, your line is live. Great, thank you very much. Luca, welcome to these calls. Just curious, there's a little bit of a tension point between the thought of what the operating margins and I know Lily uses a very unique and specific precise calculus for that with most people longer term forecasting, at least amongst the sell side, approaching high 40s percent. And I believe some of your commentary suggested that perhaps that would not be where you would aim for. Can you just maybe clarify for us your view, your take on where you think the operating margin trajectory would go under your purview. Lucas, go ahead. Yeah, sorry. Thank you Chris for your question and thank you for quoting me about this new ratio. The gross margin minus OPEX divided by revenue is quite a lengthy ratio. But just going to your question in the short run you see that we have grown our ratio in the last few quarters as we have been having this cycle of significant growth trajectory and we are starting to ramp up our investment both in ACNA and R& D. That effect will continue for sure for getting into the fourth quarter of the year. That is including as part of our guidance and what we expect to see moving into 2025 going into your question is we do expect to ramp up our demand generation activities in HGA that will pay down into 2025. As well as we will scale our R and D, we talk about some of the assets on our portfolio that moves into phase two and phase three that will continue to play out as we ramp up those investments to drive long term sustainable growth. So I would expect that in the short term we continue to see some operating margin expansion on this ratio. In long term, again we will continue to expand and drive sustainable growth. That will basically justify the investments that we do in SGNA and R and D. Thanks Lucas. Next question the next question will be. From Trung Huynh from ubs. Trung, your line is live. Hi guys, thanks for squeezing me in. So in your PR you note favorable changes to estimates for rebates and discounts for Manjaro. If you X on our numbers, if. You X on exit out mid single. Digit destock, it does look like price has gone up for the year for that product. Also Zepbound pricing looks pretty stable. So perhaps can you just talk about what you see in pricing evolution for the rest of the year but also next year as you'll have potentially sleep apnea and HFPEF on the label which may mean that you go into more government settings. Thank you Lucas. If you'd like to talk kind of high level or any net pricing dynamics worth sharing. Yeah sure. And thank you for the question going back to the Montaro so far in the year. We kind of signaled throughout the year that once we were sunsetting last year, the copay program that we had that we will see that basically tailwind on the price year on year comparison that played out as what we expected. And the sunset of course takes again a little bit of time to see that playing out. So you see a little bit of that spillover effect getting into Q3, getting into Q4. We don't expect to see major dynamics on that. And what you're starting to See basically in Q3 is what we project into the fourth quarter of the year maybe getting into the strategic sleep apnea indication. Any comments that you would like to add Patrick, on that front? I would just say in terms of safebound we are still very early on in launch and I think you clarified the stability in pricing Q3 over Q2 Nucas. What we need to have in mind is that we will continue to increase access. We will see launches outside of the US as well now with QuickFam being approved. That also can impact the global net pricing dynamics moving forward. Thanks both maybe last question Paul and then we'll wrap up. Yes, the final question today will be from Courtney Breen From Bernstein. Courtney, your line is live. Hi there. Thank you so much for the question and for squeezing me in. Coming back to obesity and perhaps looking a little longer term. You spoke to the attain maintain trial off the back of Surmount five. I note that for ofolgapan this is placebo controlled. And so I just wanted to kind of get your thoughts on kind of that being the comparator for us. Kind of that being the comparator suggests that this is about kind of duration of treatment expansion to patients, which would really be an expansion of the total market rather than kind of displacement of necessarily another obesity product. Can you just talk a little bit about orfographon and kind of the future of how this could expand the market? Yeah, thanks Courtney for the question on orfa. Maybe I'll hand to Patrick to talk about that and some of the commercial potential, commercial strategy and the Attain Maintain trial. Thank you for noticing that, Patrick. Thank you very much, Courtney. We are looking forward to the readout of the ORFO Phase 3 trials next year, 2025. But I think overall we see a significant opportunity here. It's going to be the first oral if we deliver along the lines as we saw on phase two with an efficacy along the lines of an injectable, along the lines of semaglutide. So I think that will really position us to to scale globally we are avoiding the cold chain requirements, et cetera. But also in the US we see an opportunity to further penetrate because we know that even if the experience with the auto injector, once you have tried it is really good. We know that there is an easel fear in the marketplace that probably impacts 20 to 25% of the population. So I think there is a huge opportunity to expand. When you refer particularly to the attain maintain, I think there is an obligation on our side to really better understand how can you best keep patients on treatment for a longer period of time knowing that obesity is a chronic disease. That's why we are leaning in on some of maintain to see what is the lowest efficacious dose that you can keep patients on during a longer time. And similarly with attain maintain we don't expect a major shift on by clinicians from injectables to orals. But I think this is one alternative to continue treat patients for the periods they need to be on medication, which is a chronic disease. And we are doing whatever we can to improve adherence and improve patient outcomes. Great. All right, thank you Patrick and I think we're wrapping up Dave. Okay, great. Well, thanks for joining us today, everyone, I want to end the call by just thanking Joe Fletcher who is moving on from his role as head of IR to a new role, critical role of CFO manufacturing. I think you'll all agree Joe did a great job in representing Lilly to the street over the last many years and we welcome Mike Zippar into the role, returning to IR actually after various rotations of the business. And it'll be an exciting time ahead with Mike as your main point of contact. So thank you all for joining us today and as usual, if you have follow up questions, please give us a call at the IR team and look forward to seeing everyone on the road over the coming months. Take care. Thank you. And ladies and gentlemen, this does conclude our conference for today. This conference will be made available for replay beginning at 1pm today, running through December 4th at midnight. You may access the replay system at any time by dialing 800-332-6854 and entering the access code 987.",
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          "text": "The next question will be from Evan Segerman from BMO Capital. Evan, your line is live.",
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          "text": "Thanks Mohit.",
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          "text": "Thanks, Evan. Yeah, Hot topic indeed. Maybe in terms of talking about whether there's a financial impact where you see that. Let Patrick feel that and then maybe the broader question around the fda. I'll let Dave chime in. So, Patrick.",
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          "text": "Thank you so much for the question.",
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          "text": "Next question will be from Umar Rafat from Evercore isi. Umar, your line is live.",
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          "text": "Translate to an acceleration in prescriptions.",
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          "text": "Ladies and gentlemen, thank you for standing by and welcome to the Lilly Q3 2024 earnings call. @ this time, all participants are on a listen only mode. Later, we will be conducting a question and answer session and instructions will be given at that time. Should you request assistance during the call, please press star then zero and an operator will assist you offline. I would now like to turn the conference over to your host, Joe Fletcher, Senior Vice President of Investor Relations. Please go ahead.",
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          "text": "Thank you, Paul. And good morning everybody. Thanks for joining us for Eli Lilly and Company's Q3 2024 earnings call. I'm Joe Fletcher, Senior Vice President of Investor Relations and joining me on today's call are Dave Ricks, Lilly's chair and CEO Dr. Dan Skavronsky, chief Scientific Officer and President of Lilly Immunology Lucas Montarse, Chief Financial Officer Anne White, President of Lilly Neuroscience Ilya Ufa, President of Lilly International Jake Van Narden, President of Lilly Oncology and Patrick Johnson, President of Lilly Cardiometabolic Health and Lilly usa. We're also joined by Susan Hedgeland, Mikayla Irons, Mike Springnether and Lauren Zuerki of the IR team. During this call, we anticipate making projections and forward looking statements based on our current expectations. Our actual results could differ materially due to several factors including those listed on slide 4. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10K and subsequent filings with the SEC. The information we provide about our products and pipeline is for the benefit of the investment community. It's not intended to be promotional and is not sufficient for prescribing decisions. As we transition to our prepared remarks, please note that our commentary will focus on non GAAP financial measures. Now I'll turn the call over to Dave.",
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          "text": "Okay, thanks Joe. In Q3, Lilly continued to make progress across the business. We delivered strong revenue growth, we advanced and expanded our pipeline and we invested in new product launches and continued expanding manufacturing Network. On slide 5, you can see details of our financial performance and progress related to our strategic deliverables. Revenue grew 42% after excluding the impact of revenue from the Olanzapine portfolio which we divested. In Q3 2023, new product revenue grew by over $3 billion led by Manjaro and Zepbound. US demand for Manjaro and Zepbound has been strong and continues to grow as we expand both access and supply. US sequential quarter over quarter prescription volume growth was 25% in Q3. All doses are available for order from Lilly in both the wholesale channel and Lilly Direct Pharmacy Solutions. The launch of a single dose zepbound vials in the US exclusively through LillyDirect's self pay channel further expanded supply and access in the quarter. And finally, we remain on track to exceed the production target of at least 1.5 times the saleable doses of increethen medicines in the second half of this year compared to the second half of last year. We continue to see strong performance across the balance of our portfolio in oncology, immunology and neuroscience. Excluding revenue from the Olanzapine portfolio, the non ankertin growth of the company was 17% in Q3. We achieved several key pipeline milestones this quarter, including the approval of evglis in the US for the treatment of moderate to severe atopic dermatitis, the approval of Kissunla in Japan and Great Britain for the treatment of early symptomatic Alzheimer's disease, disclosure of positive 176 week data from the CERMAT1 Phase 3 study of tirzepatide in adults with prediabetes and obesity or overweight and the recent presentation of positive Data from the Phase 3 Trailblazer Alt 6 study evaluating different dosing regimens for Donanemab Our manufacturing expansion agenda remains a top priority In September we invested nearly $2 billion to increase our manufacturing footprint in Ireland. This brings the total commitments to build, upgrade and acquire manufacturing facilities announced since 2020 to more than $20 billion. And beyond this $20 billion commitment, we also announced a separate $4.5 billion investment to develop the Lilly Medicine Foundry. This first of its kind facility will be dedicated to research and development for manufacturing process design and to develop high quality investigational medicines for our clinical trials. It will be located in Lebanon, Indiana, a short drive from the corporate headquarters. This investment underscores our confidence in our pipeline and the urgency we bring to bring our medicines innovative medicines to patients around the world. In August, we closed the acquisition of Morphic Therapeutics, adding oral Intragan assets to our early phase immunology portfolio and lastly, we returned over $1.6 billion to shareholders via dividends and share repurchases. On slide 6, you'll see key events since our Q2 call, including the milestones I mentioned earlier and several other key updates. Last month we appointed Lucas Montarse as Lilly's executive vice president and chief financial officer. Lucas has 23 years of experience at Lilly and has worked with the executive team and the board for a long time. So congratulations Lucas. Now let me turn the call over to Lucas to review our Q3 financial results and provide an update on our 2024 financial guidance.",
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          "text": "Thanks Dave. Slide 7 summarizes our financial performance in the third quarter which is highlighted by strong revenue growth across our new products as well as our non Incretin medicines. As Dave mentioned, revenue grew 42% after excluding the impact of revenue from the Olanzapin portfolio and was primarily driven by Mounjaro and Sebum. Revenue from our non incretin portfolio grew 17% after excluding the impact of revenue from the Olanzapin portfolio. Gross margin as a percentage of revenue increased to 82.2%. Gross margin primarily benefited from favorable product mix and higher realized prices partially offset by the sale of rights for the olanzapin portfolio in Q3 2023 and higher manufacturing cost. R&D expenses increased 13% driven by continued investment in both our early and late state portfolio. We recognize $2.8 billion of acquired IPRND charges primarily related to the acquisition of Morphic Therapeutics. Marketing, selling and Administrative expenses increased 16% primarily driven by promotional efforts supporting ongoing and future launches. Operating income increased to nearly $1.8 billion driven by higher revenue from new products partially offset by operating expenses growth. The effective tax rate was 37.6% reflective the unfavorable impact of non deductible acquired IPRND charges. Other than the impact of acquired iprnd, the underlying tax rate was consistent with previously provided guidance. We delivered earnings per share of $1.18 up from $0.10 in Q3 2023 and this includes a negative impact of $3.08 from acquired IPRND charges. On slide 9, we quantify the effect of price rate and volume on revenue growth. US revenue increased 46% with volume growing 35% driven by Zeban and Montjaro, partially offset by declines in Truly cities. Realized prices increased 11% in the U.S. primarily driven by Trulicity, Humalog and Verzenic while Mounjaro and Zeban demand remains strong and growing quarter by quarter. Revenue growth in 2024 has been impacted by supply and channel dynamics as we highlighted in Q2, increasing supply led to higher shipments that allow us to fulfill the majority of wholesalers back orders serving as a tailwind to sales. In Q3 we saw channel inventory decrease as wholesalers continue to navigate the complexities of high volume cold chain products across a dozen different dose and brand combinations. We estimate this inventory decrease impacted Q3 sales of Mounjaro and Sepan by mid single digits as a percentage of aggregate used sales of these products Europe revenue grew 39% in constant currency when excluding the impact of the divestiture of the Olanzapin portfolio. This growth was primarily driven by Mounjaro, Versenio and Jardians. We continue to be pleased with the Mounjaro equipment launches in Europe and have now launched in the uk, Germany, Spain and most recently Italy. Revenue in the rest of the world grew 45% in constant currency driven by volume growth of Mounjaro and to a lesser extent strong performance of Versenio and Jardians. Moving to China, revenue increased 17% in constant currency. This increase was driven by volume growth of Tybit and favorable pricing impacts for Humado. Finally, Japan grew 17% in revenue, cost and currency volume growth of 20% was driven by uptake of Mounjaro, Persenio and Jardiance. Slide 10 provides additional perspective of performance across our product categories. Mounjaro sales were $3.1 billion globally with almost 2.4 billion of net sales in the US. We continue to see solid uptake of mounjaro outside the US with sales in Q3 totaling $728 million. Barsenio continues its growth trajectory with worldwide sales increasing 32% driven by strong execution in the early breast cancer indication Jaipirka. Worldwide revenue was $81 million when excluding the impact of Japan collaboration milestones recognized in Q2. Jaipirca continued its sequential quarter over quarter growth trend demonstrating sustained uptake in both the MCL and CLL patient population worldwide. Onboard revenue increased to $41 million. We are pleased with our progress gaining commercial access for ombo in the US as of January 2025 we will have first line access at 2 out of the 3 major PBMs. We were also excited to receive US approval for Kizonla and EPGLIS in Q3. The Kisanla launch is underway and progressing and the EPLIS launch began early this month. We are pleased to have already secured formulary access for Epilis with one of the major PBMs worldwide. Trulicity revenue declined 22% driven by lower volume partially offset by higher realized prices. Slide 11 provides an update on the US launch of Zipboard. We continue to see strong growth trends leading to sales of over $1.2 billion. We have broad formulary coverage for Setbound as of October 1st. Setbound has approximately 87% access in the commercial segment and we are making ongoing progress expanding our employer Opt Ins. We are in the early days of launching single dose Sepban vials in the US exclusively through Lilly direct 2.5 and 5 milligram single dose vials are currently available to self pay patients at a 50% or greater discount compared to the list price of other incretin medicines for obesity. This offering helps even more adults living with obesity access setbone including Medicare beneficiaries and those without 12th we provide an update on capital allocation on slide 13 you can see our updated guidance for the full year we are updating our revenue guidance range to $45.4 billion to $46 billion. The new midpoint range represents approximately 50% growth in Q4 2024 compared to the same quarter last year, demonstrating a continuation of revenue growth acceleration. We are investing heavily in increasing supply of Tirzepatide and have been carefully balancing our demand creation activities and launches into new markets with our production to support continuity of care for patients in Q3 we continue to be prudent scaling up and demand generation activities. This is the driver for lowering the top end of the range. We continue to expect that we will exceed our goals to increase production of incretin sellable doses by at least 50% in the second half of 2024 compared to the second half of 2023. Now, with all the doses of Mountjaro on sepan available, we will accelerate demand activities and while there is a lag to flow through revenue, we expect to see the impact of these efforts in Q2 and into 2025. Lastly, we are also expecting new Montaro launches internationally to contribute to growth in Q4. Our expected ratio of gross margin less OPEX divided by revenue remains unchanged on both a reported and a non GAAP basis. Other income and expense is now expected to be in the range of 425 to 325 million dollars of expense on a reported basis and is unchanged on a non GAAP basis. We have updated our estimated effective tax rate to be approximately 17% driven by the impact of non deductible IPR and D in Q3. EPS is now expected to be in the range of $12.05 to $12.55 on a reported basis and $13.02 to $13.52 on a non GAAP basis. Both ranges reflect the updated mentioned earlier as well as acquire operating iprnd charges through Q3 of approximately $3.1 billion. Now I will turn the call over to Dan to highlight our progress on.",
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          "text": "R and D. Thanks Lucas Lilly R and D had another productive quarter. Let me begin by sharing some late phase updates including some exciting Phase three data that we shared at recent medical congresses. Starting with Neuroscience Yesterday at the Clinical Trials in Alzheimer's Disease conference, we were pleased to share positive results from our phase 3 Trailblazer AL6 trial which evaluated different dosing regimens for initiation of dnenamab treatment to understand their effect on ARIA E. In this trial we tested a modified titration which shifted one vial of dinenumab from the first infusion to the third as shown on slide 14. We designed this modified titration to achieve identical total dose of Dunedamab administered in the first three months as does our standard dosing regimen, but we hypothesized that the smoother increase in dose could result in less rf. We are pleased to see in this trial that indeed by pharmacokinetic analysis we achieved equivalent cumulative exposure between the modified titration and the standard dosing regimen and as a result we achieved similar levels of amyloid plaque removal and phospho tau217 reduction. Importantly, we also confirmed our hypothesis on ARIA and showed that the modified titration reduced the incidence of aria E to 14% compared with 24% for those receiving the standard dosing regiment. As well, lower frequency of symptomatic RAE, lower radiographic severity of all categories of ARIAE and lower ARIAE in APOE 4 genotype carriers was observed using the modified titration as compared to the standard dosing regimen. We plan to submit a supplemental BLA to the FDA in the coming weeks for this modified titration. Our efforts on rimturnatug continue to progress and we're starting a phase three efficacy study of rimturnatug focused on a preclinical stage of the disease, similar to our ongoing Trailblazer ALS3 trial for Dunenumab, where we are trying to reduce the risk of progression to symptomatic Alzheimer's disease. In this upcoming phase three registrational trial called Trail Runner 3, we are evaluating a fixed duration of monthly subcutaneous administration of offering what we see as a potentially convenient option for this earlier patient population. We'll share more details about the Study design of Trailrunner 3 tomorrow at CTAD. Turning to CardioMetabolic health Last month we shared data from our remaining phase three studies for our weekly basal insulin called insulin Escentaura Alpha. As a reminder, the phase 3 consists of five global registration studies, four of which are in adults with type 2 diabetes and one is in adults with type 1 diabetes. We are pleased that each study met its primary endpoint of non inferior A1C reduction versus insulin glargine or insulin deglodeq, which are the most frequently used daily basal influence in the studies evaluating EBCITOR in people with type 2 diabetes. The results demonstrated that EFCITOR achieved meaningful A1C reductions with relatively low hypoglycemia rates. We were particularly excited with the results for Quint 1 in which EPSOTORA was administered via fixed doses using a single use autoinjector. In this 52 week study in people with type 2 diabetes, Epsilon lowered participants A1C by 1.31% compared to 1.27% for insulin glargine. This impressive A1C reduction was achieved with low hypoglycemia rates. Actually, escitora had approximately 40% lower rates of severe or clinically significant hypoglycemia than did daily insulin glargine. These data highlight the power of an easier to use dose form of a weekly insulin for people who are just initiating basal insulin therapy for the first time. We look forward to discussing the results from the Quint Phase 3 program with global regulatory agencies. It has also been a productive quarter for our late phase incretin programs. First, as shown on slide 15, we shared positive 176 week data from the Surmount 1 Phase 3 study of tirzepatide in adults with prediabetes and obesity or overweight which demonstrated a remarkable 94% reduction in the risk of developing type 2 diabetes. This is the longest duration tirzepatide data to date and and we are highly encouraged to see that patients on the 15 milligram dose achieved sustained weight loss of nearly 23% during a more than three year treatment period and that this weight loss was accompanied by a significant reduction in risk of developing diabetes. We look forward to sharing the detailed results next week at Obesity Week. These results add to compelling data showing the benefit of the combined pharmacology of dual GIP and GLP1 receptor agonism in several obesity related complications including type 2 diabetes, metabolic dysfunction, associated steatohepatitis or MASH, moderate to severe obstructive sleep apnea and heart failure. We are working quickly to bring tirzepatide to more adults living with obesity and its complications and we are pleased to share that we expect U.S. regulatory action for tirzepatide in adults with obesity and obstructive sleep apnea yet this year and that we will submit for U.S. approval tirzepatide in adults with obesity and heart failure with preserved ejection fraction before the end of this year. Another avenue to advance patient care is the maintenance of body weight reductions. We're conducting two Phase 3B weight loss maintenance trials. The first is Surmount Maintain which compares either tirzepatide 5mg or tirzepatide maximum tolerated dose to placebo. The second is Attain Maintain which evaluates our oral GLP1 or for glipron versus placebo after tirzepatide or semaglutide in participants who complete surmount 5. The 3B head to head study of tirzepatide versus semaglutide. We look forward to sharing the top line data readout for CMOT5 later this year. Next, in oncology, the phase 3 EMBER3 study evaluating our oral SIRD imlunestrant in patients with second line ER positive HER2 negative metastatic breast cancer was positive. The study evaluated three arms imlunestrant as a monotherapy investigator's choice of endocrine therapy monotherapy and Imlanestran in combination with abemaciclib. Based on the results from this trial, we expect to submit an NDA to the FDA by year end and we look forward to sharing detailed results at an upcoming medical meeting. The phase three portion of the olomirasib first line KRASG12C lung cancer study is now underway. The first phase three trial for this class of medicines in newly diagnosed locally advanced or metastatic lung cancer regardless of PD L1 expression. This comes after recently defining the dose of the medicine in combination with standard of care regimens in consultation with the FDA under Project Optimus. We continue to believe we could have a leading agent in this class and look forward to execution of the late stage program. Finally, in immunology we're cited by the recent US FDA approval of lebratizumab as EBGLIS for adults and children 12 years and older with moderate to severe atopic dermatitis. EBGLIS provides a new first line biologic treatment that targets a main cause of eczema inflammation that offers significant early skin clearance and itch relief with convenient once monthly maintenance dosing following the initial phase of treatment. We recently shared compelling long term data showing that lebrikizumab provides sustained disease control for up to three years in more than 80% of patients with moderate to severe atopic dermatitis who responded to epcos treatment at 16 weeks. We have also initiated two phase three studies of leprikizumab in adults with perennial allergic rhinitis and chronic rhinositis with nasal polyps. As we continue to expand our immunology portfolio to help more patients. We're conducting two phase three studies evaluating ixekizumab and tirzepatide together in patients with obesity or overweight and either psoriatic arthritis or moderate to severe plaque psoriasis. Obesity is associated with an increased risk of developing autoimmune diseases and can negatively impact disease outcomes. TULPS has already demonstrated strong efficacy in treating psoriatic arthritis and plaque psoriasis, and we are excited to see the potential for additional benefits for patients when combined with the significant and sustained weight loss offered by Zepbound. Slide 16 shows select pipeline opportunities as of October 28 and Slide 17 shows potential key events for the year. I've already covered our late phase progress, so now I quickly cover updates for the early phase pipeline. Starting again with neuroscience, we recently initiated a phase two study of an epiregulin antibody in chronic neuropathic pain associated with distal sensory polyneuropathy. We'd previously shown this molecule in phase one of the pipeline as an undisclosed mechanism in pain. We also have begun phase one studies on two new neurodegeneration assets, an alpha synuclein directed SIRNA and a Tau directed Sirna. Earlier this morning at CTAD, we disclosed detailed results from our phase 2 study of separate Rhognostat are oral Oglik nakase anti tau agents. While neither does slow clinical decline in early symptomatic Alzheimer's disease, biomarker data suggests potential impacts on tau pathology, brain volume and neuroinflammation safety follow ups for the study are ongoing. Turning to cardiometabolic health in the coming days, we will initiate a phase 2 study of alura Lintide, our long acting amyloid receptor agonist for chronic weight management in combination with tirzepatide in patients with type 2 diabetes and a phase 2 study of bimagramab alone or in combination with tirzepatide for chronic weight management in participants without type 2 diabetes. We will also be advancing Volan relaxin, our long acting relaxin molecule, into phase two in adults with chronic kidney disease. We removed the Phase I Apoc3 Sirna asset in cardiovascular disease as it did not meet our bar for continuing clinical development in oncology. 2024 continues to be a very productive year for new clinical starts. Since the last call, we advanced three new molecules into phase 1 studies, our oral SMARCA2 or BRM inhibitor, our KRAS G12D inhibitor and our pan KRAS inhibitor. These three initiations bring the total new clinical starts in oncology in 2024-7, exceeding the goal we shared earlier this year to put at least five new potential medicines in the clinic, and we've done that across three different modalities, emblematic of our strategy to utilize therapeutic modality diversification to combat treatment resistance and improve patient outcomes. We expect this new slate of clinical programs will set us up for an exciting 2025 as we look to see which programs deliver differentiated and important early clinical data sets for finally, in early stage immunology, we're also excited to initiate several new Phase 2 studies. First, we moved DC853, an oral IL17 inhibitor, from the Dice Therapeutics acquisition, into Phase 2 in adults with moderate to severe plaque psoriasis, and we removed DC806 from the pipeline in favor of 853, which is a more potent molecule. Second, we are initiating a phase 2 study combining Altrecobart and miracizumab in adults with moderately to severely active ulcerative colitis. In addition, we are terminating the phase 2b study of parasolumab in rheumatoid arthritis due to the overall benefit risk profile of the molecule in this study. Finally, after welcoming our morphic colleagues to Lilly in August, our pipeline now Reflects the oral alpha 4 beta 7 integrin inhibitor morph 057 in phase 2 for moderate to severe ulcerative colitis and moderate to severe Crohn's disease. Q3 was an exceptionally productive quarter for Lilly R and D, and we're pleased with our important progress we're making for patients across all of our therapeutic areas. Now I'll turn the call back to Dave for closing remarks.",
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          "text": "Okay, thanks Dan. Before taking questions, let me briefly summarize our progress in the quarter. We had strong revenue growth across both Manjaro and Zeppelin, as well as our oncology, immunology and neurosciences medicines. Significant advancements in our pipeline included approval of evglis for moderate to severe atopic dermatitis in the us, Kisunla for early symptomatic Alzheimer's disease in Japan and Great Britain, and positive data disclosures for phase 3 studies of tirzepatide and adenumab. We are confident in Lilly's bright future. We have now launched in major geographies the cohort of medicines that we expect will serve as the driver of our growth through the balance of this decade, that is Manjaro, jperka, Omvow, Zepbound, Kasunla and Eblis. We expect these products, together with our already launched products will contribute to strong growth of the company in 2025. In addition, we plan to continue to scale R and D and step up our investment across manufacturing and commercial to support the successful launches of these medicines to help even more patients next year. So now I'll turn the call over to Joe to moderate the Q and A session.",
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          "text": "Thanks Dave. We'd like to take questions from as many callers as possible, conclude our call in a timely manner so consistent with prior quarters. We'll respond to one question per caller. So I ask that you limit to one question per caller as we will end the call at 11am if you have more than one question you can re enter the queue and we'll get to your question if time allows. So Paul, please provide the instructions for the Q and A session and then we're ready for the first follow.",
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          "text": "Certainly at this time we will be conducting a question and answer session. If you have any questions, please press Star one on your phone. At this time. We ask that participants limit themselves to one question on today's call. If you do have a follow up question, please rejoin the queue by pressing Star one at anytime. We would also ask that while posing your question you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. The first question today is coming from Chris Schott from JP Morgan. Chris, your line is live.",
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          "text": "Great. Thanks so much. Just to kick off the questions, can you just help bridge a bit from the 3Q sales we just saw reported to the 4Q implied results? It's obviously a substantial step up in sales. Sounds like part of this is you're now accelerating demand generation efforts given the improved capacity, but I was just hoping to get a little bit more color on exactly what those efforts are and how quickly you expect those programs can.",
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          "start_time": "00:52:22,004",
          "end_time": "00:52:22,840",
          "text": "Thank you.",
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          "text": "Thanks both. Paul, Next question.",
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          "text": "Thanks Chris for the question, I'll maybe hand over to Patrick since I'm guessing a lot of the question is around Tirzepatide related, but let Lukas jump in as needed.",
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          "text": "Patrick thank you very much Chris. I think it's first important to emphasize that the overall performance and health of both Mounjaro and Setbound are very strong and we saw a slightly accelerated growth in Q3 of more than 25%. And also the market, the underlying market for both type 2 and obesity continues to grow. We took a more prudent approach than we anticipated in Q3, pretty much driven by the need to deliver a good consumer experience that has been one of our triggers for any investment. Based upon the experience we faced in the first half of the year when a lot of the calls to our customer service center was about supply, actually more than 20%. We are now down to less than 1% of those being supply related. So what we are doing right now is that we are investing heavily in our DTC effort, which we haven't done in the past. Both supply allows us to invest strongly there, but it's not a demand issue. And similarly we're fully leaning in on all the HCP promotional efforts, also providing samples in the marketplace to provide us. So we remain very confident based upon the underlying trend in the marketplace today and also the growth of both Setbound and Mounjaro in terms of trx, MBRX and TRX that we are up for a good few for.",
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          "text": "Maybe just to add to that. Thank you Chris, for the question. When you look at the Midpoint that I mentioned, 50% growth that we expect for the fourth quarter compared with the 42%, it's a step up of 8%. When you remove the channel dynamics that we alluded in Q2, the step up of growth is very consistent throughout the quarters. So the acceleration and the drivers are the ones that Patrick mentioned. Maybe just to add to that OUS as well, we continue to advance and get new countries that we are going to be launching Mounjaro as well. That will drive that part of that growth acceleration in the fourth quarter.",
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          "text": "Thanks, Paul.",
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          "start_time": "00:33:03,132",
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          "text": "Next question.",
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          "text": "The next question will be from Jeff Meacham from Citigroup. Jeff, your line is live.",
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          "text": "Hey guys, thanks for the question.",
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          "start_time": "00:36:25,470",
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          "text": "Hi guys.",
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          "text": "And Joe, congrats on your new job. I want to touch on compounding. Given the headlines, do you believe that compounded drugs are impacting demand? And secondarily, how do you frame kind of the FDA's waffling on the shortage list as it relates to compounding? It seems that this has been a hot button issue. I'd love your perspective. Thank you so much.",
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          "text": "I guess related to that, I just.",
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          "text": "Wanted to dig into the 3Q volatility. I mean, Dave, you mentioned the scrip demand sequentially. I guess so given that, why would you see such a big drawdown this quarter? I guess investors are trying to figure.",
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          "text": "Out if the sequential trends are perhaps a leading indicator of a moderation demand.",
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          "text": "Or if it's just the lumpiness of the rollout in excess.",
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          "text": "Thanks, Dave.",
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          "text": "You want to feel that?",
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          "text": "Be from Mohit Bansal from Wells Fargo. Mohit, your line is live.",
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          "text": "Yeah, maybe because it's kind of a macro thing you're asking there. I think first of all there is a lot of lumpiness in channel stocking. I think all the sell side analysts on this call have probably struggle with that as we have, you know, exiting Q1. We can recall that we had a number of our dosage forms on backorder and we pretty much reached a nadir of supply and the wholesalers that was restocked in Q2 and then we saw a drawdown in Q3. I think what we really don't control and don't attempt to but is a reality is that downstream customers from Lilly wholesalers and retailers are making their own decisions about which of the 12 different dosage forms they want to stock and at what level. There are some physical constraints to that cold chain capacity is constrained and there are financial constraints working capital that they're managing to. Those are their decisions to maintain their customer service levels. I think what we've done is sort of move our set point of how much stock we want to have on hand before we go initiate demand stimulating activities which we had more or less paused from Ajaro in the first half and never started for Zepbound remembering we launched in December of last year. So I think in market data you guys can all read and you see Jeff yourself, and we do see acceleration of both brands in Q3 over Q2 in actual consumption. And our estimate is that will continue or accelerate as we add US stimulation to that demand, which as Patrick said, we're going to begin doing here really mid November in earnest ex US Demand is another factor that affects sales and that too we moved out launches by about a quarter just to make sure we had enough buffer so when customers wanted a prescription, they could get it filled reliably. And I think that's an important thing for us to keep that trust going forward. So, you know, at a macro level, is there a demand problem here? No, actually. Is there a supply problem?",
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          "text": "No.",
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          "text": "Although if we had unlimited demand, there would be. So we're carefully gating those two things together as we escalate supply in Q4, which as I mentioned, we're going to beat the 50% growth number. You'll see us grow our demand stimulation as well. And I think that's really about Q4, but even more about Q1 of 2025 and continuing acceleration there. So business is super healthy. We feel good about where we are. Obviously, you know, there was some choppiness this quarter, but I think underlying growth here is as strong as we would have hoped.",
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          "text": "Thanks, Dave Paul. Next question.",
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          "text": "Well, thank you very much, Evan. I think, as we all know, that it's not one reliable source when it comes to quantifying the compounding market. We also know that it's opaque and mainly cash. And there are probably reasons to believe that some of those patients are off label. So from our perspective, we actually don't estimate there to be a huge financial impact of compounding on our business. But our major concern here has been driven by safety. But thousands of people in the US Are getting medicine that is not approved by the FDA for quality, safety, or efficacy purposes. So that has been our concern. And we are mainly leaning in now, as we said earlier, to drive demand in the US marketplace for patients with obesity and type 2 diabetes.",
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          "text": "Yeah, I mean, I can't really speculate too much what's going through the FDA's mind, but I think other commentators have mentioned that the longer this goes on, the more risk they have to their own regulatory framework. So my guess is the FDA is concerned about that and they want to win this case and they're putting their ducks in a row to do so. There is an alternate, I guess, perspective that they don't care, but I think they do care. The other thing I'll say is we work closely with the FDA to approve new capacities. And it's important to note here we could do more with them and we communicate this to them directly. They're not hearing anything here. They haven't heard from me already. But we have invested massively in parenteral filling capacity and API capacity. And a big part of the delivery schedule for that, which can take two and a half to four years, is actually the regulatory process itself. So it's difficult to think about a world where the workaround to that is to unleash unregulated product. The workaround should be to collaborate with the companies to speed up legitimate product delivery. And we would embrace that discussion fully. We have a lot of things in queue now at the FDA or about to be, that could speed up what already is an impressive production ramp. We would welcome that opportunity.",
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          "text": "The next question will be from Seamus Fernandez from Guggenheim. Seamus, your line is live.",
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          "text": "Oh, thanks. My question is actually on how you feel the compounding situation could be resolved by the availability of an oral small molecule that can be provided at substantial scale. It Seems like this is the easiest and most straightforward answer to the compounding crisis. Once that occurs, does it make sense with that availability regardless of product, that the agency would move to resolve the crisis? Or is this a product by product situation such that if Novo can't get their house in order in that context, that we'll end up with having this compounding issue just draw out over time.",
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          "start_time": "00:40:13,958",
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          "text": "Thanks.",
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          "text": "Thanks Seamus. Yeah, I'll hand back to Dave, although if you're referring to our of course our oral GLP1 non peptide agonist or forglipron, I mean that's still a ways away from the phase three turning over and then ultimately coming to market. But Dave, maybe what would you add to your prior comments?",
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          "text": "Yeah, well, I mean in the long run of course there's a potential billion customers on the planet and I think we've said, I've said that probably the only way that a big chunk of those are served well is with oral products because of the production system efficiencies there versus parenteral filling of proteins. So it's important, of course we're in the lead there and we want to see our foreground be successful, but we need the data and then submission and launch would put that sometime something like less than two years from now. But first of all, I wouldn't characterize compounding as a crisis. It certainly isn't one for us. I think the problem is people are being harmed and duped and so that's kind of what we'd like to see stop. But as Patrick said, we don't really see a financial impact on Lilly of compounding. I think as an industry we should probably be worried that if this grows and is allowed to continue then it sort of creates us backdoor generic world. But as I said, I think the FDA wants to stop that for good reasons, for public safety reasons, and they'll do that. At the end of the day, FDA views this as a product by product analysis and right now Tirzepatide is not in shortage and therefore for mass compounding should not be permitted. There's a stay, et cetera in the court, but we think that should be the state there as it relates to semaglutide. You'll have to ask Novo that. Although we're working hard to help Novo with their supply problem by reducing demand for semaglutide and increasing impurtious appetite. So maybe it'll resolve that way. Thanks, Dave.",
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          "text": "Paul, next question, the next question will.",
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          "text": "Great. Thank you very much for taking my question. Maybe if I can ask the demand question and supply question differently. So now you will be starting some.",
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          "start_time": "00:42:28,646",
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          "text": "Demand generation activities in the latter part of the year.",
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          "start_time": "00:42:34,550",
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          "text": "How are you thinking about the access side of it? Do you think that there is some convergence between access, demand generation and supply into 2025? Because we are hearing that some of.",
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          "start_time": "00:42:46,882",
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          "text": "The payers are restricting it even more now.",
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          "text": "So we'd love to understand your thoughts on access side given that you are probably have done the negotiations at this point.",
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          "start_time": "00:42:58,602",
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          "text": "I'll hand over to Patrick to talk.",
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          "text": "Thanks Celia Paul. Next question.",
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          "text": "Next question will be from Terence Flynn from Morgan Stanley. Terrence, you're line us live.",
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          "text": "Yes, the final question today will be from Courtney Breen From Bernstein. Courtney, your line is live.",
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          "start_time": "00:42:59,906",
          "end_time": "00:43:03,110",
          "text": "About maybe AHCS updates and go forward.",
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          "text": "Maybe just a few comments with Bonjaro prior to moving into cef. I think with Bongiaro we have really good Access and it's 93% and I think pretty much where we need to be across commercial and Medicare in terms of setbound, I think we have made progress in record time here, close to 90% commercial access and we continue to see improvement. In terms of employers opt in, you're correct. We hear stories about some employers opting out but the major trend is actually in favor of opting in to the anti obesity medications. We are definitely north of the 50% and I think we will have some new Data in the first part of 2026 since most of the employees are making those decisions effective 1:1 in the new year to come. So I think we're very very optimistic in that part of our business. But we're also continuing to make progress in terms of access for Medicaid and just since we connected last time we have gained 6 incremental states for Medicaid and most recently effective 10 1. We have California and Massachusetts. So big states are now covering more than 30 million lives and we expect to continue to make progress in that space. And lastly, I would just emphasize the potential approval here of obstructive sleep apnea. The approval of obstructive CD apnoea will help us with employer opt in because we know that outcome studies are critical to convince employers. But on top of that it also opens up the door for access in Medicare and with the decision that CMS announced back in April this year, we are confident that we will gain access both of OSA and Medicare. So I think we have many reasons to be excited about the outlook for 2025 driven by improved access across the commercial America space as well as the investments we have done with Lilly Direct.",
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          "text": "Thanks Patrick and Mohit, even though you didn't ask about OUS access and I don't allow multipart questions. Maybe I'll see if Ilya wants to chime in and talk a little bit about OUS access progress to date and what we see going forward. Ilya, would you like to chime in on that?",
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          "text": "Sure.",
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          "text": "Overall we have seen significant progress on our launches OUS. We have both access for type 2 diabetes. We're in some of the markets like UK, Germany and Japan and we're seeing some good progression of our share in those markets where we're already seeing leading share of market in new patient starts in those places. Of course we need to continue to develop access in other markets and then on the chronically management side we feel good about the prospects of adding countries to drive access. At the same time there's also developed self pay markets like the uk, UAE and Saudi or seeing significant progression of our share and penetration where we actually have leading share of market in TRX in these markets. And we continue to focus on both developing the self pay but also increasing access for both type 2 diabetes and chronic weight management over time and that will be gradual as we enter new markets.",
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          "text": "Great, thanks for taking the question. I was just wondering, I know you've already framed out kind of where supply would be for the second half of this year. Again as we look out to 2025, can you give us an early read on how your supply capacity efforts have been progressing and how we should think about the amount of new capacity, especially on the auto injector side that you can bring on for 2025? Thank you. I can start. Lucas, jump in. I mean we'll have a chance to lay out that as we did this year in our guidance call in early February, but qualitatively you can see the flow of our investment and capex into this space and you could kind of go backwards three years or so and expect the capacities we announced then to be coming on full line in, in that time frame and then, you know, rolling that forward. So of course we made announcement this year and those are a couple years away from having full impact. But if you go back to 21, 22, 23, we are working hard to bring those online and expect good growth next year. So I think Lucas mentioned we're seeing acceleration in demand but that means acceleration in supply during this year and we expect strong, strong growth on the total for next year. And we'll lay out the details when we get into the guide column. If you have anything else to add to that, Lucas?",
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          "text": "Maybe just one comment from my side when we talk about more so from the demand perspective. I think in the US in particular the proxy that we alluded to on the growth that we see across both Montaro and Sep bounding TRX of that 25% sequential quarter on quarter is a good proxy to start basically trending out into next year. More so to provide more perspective from the market side and the demand side than the manufacturer.",
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          "start_time": "00:48:15,480",
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          "text": "Thanks both Paul. Next question.",
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          "text": "Hi guys, thanks for taking my question. Maybe just to spend one more minute on the inventory dynamic in the quarter. I'm trying to think out loud. Could the launch of CashPay single vial option via Lilly Direct have impacted channel's interest in filling out their inventory given how the launch is going and or were there any changes in your incentives or fees to the distributors that could have impacted it? Thank you very much.",
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          "start_time": "00:48:48,530",
          "end_time": "00:48:49,050",
          "text": "Thanks.",
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          "text": "I'll let Patrick quickly handle that.",
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          "text": "Well, overall we launched the Lilly Direct Self Pay file just a month ago. We are pleased with the uptake, but we also realized that it takes some time the healthcare system to adopt the self pay in their EMR systems. But so far I would say that the impact of TRX has been quite limited and what we defined as being at the low single digit level. We expect Lilly Direct Self Pay though to be a very important channel to grow. New therapy starts moving forward but not significant in Q3.",
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          "text": "I think a short answer to both questions. No and no. We didn't change our terms and I don't think we see any change in retail stocking of the auto injector because the vials are failed.",
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          "text": "Thanks Umer. Paul, next question.",
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          "start_time": "00:49:38,580",
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          "text": "The next question will be from Steve Scala from TD Count. Steve, your line is live.",
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          "start_time": "00:49:43,860",
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          "text": "Thank you so much. For a product with a seemingly unlimited market opportunity, what appears to be great market awareness and persistent supply shortages, DTC for Zepbound really shouldn't be necessary, particularly now. DTC in my experience usually signals concern about patient volumes, awareness or competition. So the question is, if DTC were not instituted, what would be the trajectory of Zepbound over the next, say 12 months? Would consensus be achieved? And if competition is the concern, Are you getting ahead of Kagarcema Data due out soon. Thank you Chair Powell.",
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          "text": "That's a lot to unpack. Steve, I don't think we're going to speculate around a hypothetical demand curve, but maybe. I think Patrick kind of touched on this in his first answer with regard to why we're doing DTC now, maybe just reiterate that point very briefly. Patrick, around.",
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          "start_time": "00:50:45,998",
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          "text": "Yes.",
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          "text": "You know what? I think we are comparing a very different market. 1H25 versus the second half of 2025. We face some significant supply constraints and it wouldn't be responsible for us at that point in time to drive any major DTC investments and just provide consumers with a bad experience at the pharmacy level. We have much more confidence now in terms of the supply moving forward and this is not a demand issue problem. It's actually just a supply opportunity and we want to drive up that consumer awareness. So why we're doing extremely well. We just need to have in mind that the penetration in terms of obesity is just at the low single digit level, 4 to 5% and there is still a huge stigma. So whatever we can do here to drive patient activation is going to serve us very well moving forward.",
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          "text": "I would just add that actually unaided awareness for zepbound, although we're everyone on this call is highly aware of the brand name is actually not very high and that we launched this drug almost a year ago and have done no advertising. So I think it is time to introduce the brand and so people are aware of that when they speak to their doctor.",
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          "start_time": "00:51:51,720",
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          "text": "Great.",
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          "start_time": "00:51:52,184",
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          "text": "Thank you, Paul. Next question.",
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          "text": "The next question will be from Dave Reisinger from Larynx. Dave, your line is live.",
          "created_at": "2025-01-08T18:41:12.548716Z",
          "updated_at": "2025-01-08T18:41:12.548716Z"
        },
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          "segment_id": 76,
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          "speaker": "",
          "start_time": "00:51:59,960",
          "end_time": "00:52:21,868",
          "text": "Yes, thanks very much. A number of my questions have been asked. So with respect to parasolumab, I'm hoping that you could just provide a little bit more color. You mentioned that it was dropped due to the benefit risk ratio, but did you see any specific safety problems? And what is your view of the opportunity to develop another PD1 agonist for INI disease in the future?",
          "created_at": "2025-01-08T18:41:12.768342Z",
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          "segment_id": 99,
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          "speaker": "",
          "start_time": "00:59:57,810",
          "end_time": "01:00:39,870",
          "text": "And thank you for the question going back to the Montaro so far in the year. We kind of signaled throughout the year that once we were sunsetting last year, the copay program that we had that we will see that basically tailwind on the price year on year comparison that played out as what we expected. And the sunset of course takes again a little bit of time to see that playing out. So you see a little bit of that spillover effect getting into Q3, getting into Q4. We don't expect to see major dynamics on that. And what you're starting to See basically in Q3 is what we project into the fourth quarter of the year maybe getting into the strategic sleep apnea indication. Any comments that you would like to add Patrick, on that front?",
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          "start_time": "01:00:39,990",
          "end_time": "01:01:02,140",
          "text": "I would just say in terms of safebound we are still very early on in launch and I think you clarified the stability in pricing Q3 over Q2 Nucas. What we need to have in mind is that we will continue to increase access. We will see launches outside of the US as well now with QuickFam being approved. That also can impact the global net pricing dynamics moving forward.",
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          "start_time": "01:01:03,240",
          "end_time": "01:01:06,700",
          "text": "Thanks both maybe last question Paul and then we'll wrap up.",
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          "start_time": "00:52:23,700",
          "end_time": "00:52:30,560",
          "text": "Thanks, Dave. And I was getting worried that Dan wouldn't get a chance to speak on the Q and A. So maybe I'll hand this over to Dan for his thoughts.",
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          "start_time": "00:52:31,220",
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          "text": "Good. Thanks for your concern, Joe. And thanks for the good question, Dave. Yeah, I mean, parasolimab was a really interesting mechanism for us and we were excited when we saw the phase 2a data. It was a small number of patients, but had a relatively profound effect on RA symptoms, particularly in patients who had failed a previous biologic. So we sought out to replicate that in a larger phase 2b study. Unfortunately, when we came to the end of that study, the benefit risk that we'd seen in the phase two a study was not fully borne out in phase IIb. So just based on the overall profile, which includes both the efficacy and the safety of the drug, we decided not to pursue that. I see a question on the follow on PD1Agonist. We don't have one that we're pursuing right now. So that's what I'll say about that. And I think of course we'll look forward to presenting the full data package at a future meeting. Thanks, Dave.",
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          "start_time": "00:53:32,248",
          "end_time": "00:53:34,100",
          "text": "Thanks, Dan. Paul, Next question.",
          "created_at": "2025-01-08T18:41:13.769553Z",
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          "start_time": "00:53:34,520",
          "end_time": "00:53:38,620",
          "text": "The next question will be from Kerry Hallford from Berenberg. Kerry, your line is live.",
          "created_at": "2025-01-08T18:41:13.995574Z",
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          "start_time": "00:53:40,760",
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          "text": "Thank you very much, Kerry Holford Berenberg, My question actually on Visenio, please. So your competitor in this space, Novartis Kiskali, recently received a broad approval in early breast cancer, which obviously includes the high risk patient group. So I would just be interested to hear you speak about your expectations for market share evolution in that space, how you protect your position with Visenio in the high risk setting and then also if you can talk to the impact of IRA that you expect on that brand as you move through Part D reform next year and whether or not you expect the drug to be on the negotiation list for 2027.",
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          "start_time": "00:54:25,214",
          "end_time": "00:54:26,130",
          "text": "Thank you.",
          "created_at": "2025-01-08T18:41:14.36427Z",
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          "speaker": "",
          "start_time": "00:54:26,990",
          "end_time": "00:54:37,870",
          "text": "Thanks Carrie. Sort of a two part question, but I'm excited to ask Jake to chime in and maybe talk about presenting on the potential Kiskali impact as well as ira. Jake?",
          "created_at": "2025-01-08T18:41:14.595343Z",
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          "segment_id": 103,
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          "start_time": "01:01:14,200",
          "end_time": "01:01:55,590",
          "text": "Hi there. Thank you so much for the question and for squeezing me in. Coming back to obesity and perhaps looking a little longer term. You spoke to the attain maintain trial off the back of Surmount five. I note that for ofolgapan this is placebo controlled. And so I just wanted to kind of get your thoughts on kind of that being the comparator for us. Kind of that being the comparator suggests that this is about kind of duration of treatment expansion to patients, which would really be an expansion of the total market rather than kind of displacement of necessarily another obesity product. Can you just talk a little bit about orfographon and kind of the future of how this could expand the market?",
          "created_at": "2025-01-08T18:41:17.208641Z",
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          "segment_id": 85,
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          "start_time": "00:54:38,850",
          "end_time": "00:56:52,380",
          "text": "Yeah, happy to take it. Thanks for the question. Our position and expectation here around market share with respect to the adjuvant setting for Fresenio versus Kiskali hasn't really changed sort of pre approval versus now. I think we have a very robust clinical data package with a lot of follow up on our data set which is critically important for prescribers and a two year regimen where patients can finish their adjuvant therapy and move on with their life, hopefully remaining recurrence free. That's a pretty compelling proposition. It has been and I think is recognized as such in a variety of treatment guidelines that for the high risk population, the Monarch E patient population, prefer Verzenio over Kaskalia standard of care. Those expert guidelines have weighed in over the past couple of months. I don't expect that to change materially. Of course, with a new market entrant, the percentage of patients in this setting who get any CDK4.6 inhibitor as adjuvant therapy could go up and that would benefit us. And I expect that there will be some patients for whom Kiskale is a more appropriate choice. But I don't expect it to be a significant shift in our overall market dynamics. And of course the node negative population is not where we're indicated and not where we're used. And that's a story for them to tell. On the second part of your question around part D reform, it will have an impact, of course there's a push and pull here on the amount we have to contribute for catastrophic coverage being a downside. And of course the copay cap out of pocket cap on patients, particularly in Medicare where that could be a tailwind on the brand, I think it's hard to know exactly where that will net out. It probably nets out sort of in the neutral range. I don't think it'll end up being a headwind or a tailwind sort of in totality. But we have to see how that shakes out. On the last part of your question around negotiation list, I don't want to speculate on that. I don't think we have enough information yet given the evolving nature of all of the different medicines that could be up for negotiation to actually say one way or another which ones will be there just yet.",
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          "start_time": "00:56:53,320",
          "end_time": "00:56:59,100",
          "text": "Thank you, Jake. I know we're running short on time. So Paul, maybe just two or three more questions. Next question.",
          "created_at": "2025-01-08T18:41:15.028251Z",
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          "start_time": "00:56:59,400",
          "end_time": "00:57:03,980",
          "text": "The next question will be from Chris Shubhutani from Goldman Sachs. Chris, your line is live.",
          "created_at": "2025-01-08T18:41:15.271542Z",
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          "start_time": "00:57:04,920",
          "end_time": "00:57:42,640",
          "text": "Great, thank you very much. Luca, welcome to these calls. Just curious, there's a little bit of a tension point between the thought of what the operating margins and I know Lily uses a very unique and specific precise calculus for that with most people longer term forecasting, at least amongst the sell side, approaching high 40s percent. And I believe some of your commentary suggested that perhaps that would not be where you would aim for. Can you just maybe clarify for us your view, your take on where you think the operating margin trajectory would go under your purview.",
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          "start_time": "00:57:44,660",
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          "text": "Lucas, go ahead.",
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          "start_time": "01:01:56,530",
          "end_time": "01:02:07,710",
          "text": "Yeah, thanks Courtney for the question on orfa. Maybe I'll hand to Patrick to talk about that and some of the commercial potential, commercial strategy and the Attain Maintain trial. Thank you for noticing that, Patrick.",
          "created_at": "2025-01-08T18:41:17.294688Z",
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          "start_time": "00:57:45,764",
          "end_time": "00:59:07,066",
          "text": "Yeah, sorry. Thank you Chris for your question and thank you for quoting me about this new ratio. The gross margin minus OPEX divided by revenue is quite a lengthy ratio. But just going to your question in the short run you see that we have grown our ratio in the last few quarters as we have been having this cycle of significant growth trajectory and we are starting to ramp up our investment both in ACNA and R& D. That effect will continue for sure for getting into the fourth quarter of the year. That is including as part of our guidance and what we expect to see moving into 2025 going into your question is we do expect to ramp up our demand generation activities in HGA that will pay down into 2025. As well as we will scale our R and D, we talk about some of the assets on our portfolio that moves into phase two and phase three that will continue to play out as we ramp up those investments to drive long term sustainable growth. So I would expect that in the short term we continue to see some operating margin expansion on this ratio. In long term, again we will continue to expand and drive sustainable growth. That will basically justify the investments that we do in SGNA and R and D. Thanks Lucas.",
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          "start_time": "00:59:07,258",
          "end_time": "00:59:10,122",
          "text": "Next question the next question will be.",
          "created_at": "2025-01-08T18:41:15.916045Z",
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          "start_time": "00:59:10,146",
          "end_time": "00:59:14,150",
          "text": "From Trung Huynh from ubs. Trung, your line is live.",
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          "speaker": "",
          "start_time": "00:59:15,730",
          "end_time": "00:59:25,914",
          "text": "Hi guys, thanks for squeezing me in. So in your PR you note favorable changes to estimates for rebates and discounts for Manjaro. If you X on our numbers, if.",
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          "start_time": "00:59:25,922",
          "end_time": "00:59:28,016",
          "text": "You X on exit out mid single.",
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          "start_time": "00:59:28,048",
          "end_time": "00:59:49,840",
          "text": "Digit destock, it does look like price has gone up for the year for that product. Also Zepbound pricing looks pretty stable. So perhaps can you just talk about what you see in pricing evolution for the rest of the year but also next year as you'll have potentially sleep apnea and HFPEF on the label which may mean that you go into more government settings.",
          "created_at": "2025-01-08T18:41:16.522135Z",
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          "start_time": "00:59:49,920",
          "end_time": "00:59:52,138",
          "text": "Thank you Lucas.",
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          "start_time": "00:59:52,154",
          "end_time": "00:59:56,122",
          "text": "If you'd like to talk kind of high level or any net pricing dynamics worth sharing.",
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          "start_time": "00:59:56,186",
          "end_time": "00:59:57,110",
          "text": "Yeah sure.",
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          "start_time": "01:02:08,910",
          "end_time": "01:03:40,490",
          "text": "Thank you very much, Courtney. We are looking forward to the readout of the ORFO Phase 3 trials next year, 2025. But I think overall we see a significant opportunity here. It's going to be the first oral if we deliver along the lines as we saw on phase two with an efficacy along the lines of an injectable, along the lines of semaglutide. So I think that will really position us to to scale globally we are avoiding the cold chain requirements, et cetera. But also in the US we see an opportunity to further penetrate because we know that even if the experience with the auto injector, once you have tried it is really good. We know that there is an easel fear in the marketplace that probably impacts 20 to 25% of the population. So I think there is a huge opportunity to expand. When you refer particularly to the attain maintain, I think there is an obligation on our side to really better understand how can you best keep patients on treatment for a longer period of time knowing that obesity is a chronic disease. That's why we are leaning in on some of maintain to see what is the lowest efficacious dose that you can keep patients on during a longer time. And similarly with attain maintain we don't expect a major shift on by clinicians from injectables to orals. But I think this is one alternative to continue treat patients for the periods they need to be on medication, which is a chronic disease. And we are doing whatever we can to improve adherence and improve patient outcomes.",
          "created_at": "2025-01-08T18:41:17.406027Z",
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          "start_time": "01:03:41,310",
          "end_time": "01:03:41,958",
          "text": "Great.",
          "created_at": "2025-01-08T18:41:17.502688Z",
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        },
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          "start_time": "01:03:42,094",
          "end_time": "01:03:44,758",
          "text": "All right, thank you Patrick and I think we're wrapping up Dave.",
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          "start_time": "01:03:44,854",
          "end_time": "01:04:23,590",
          "text": "Okay, great. Well, thanks for joining us today, everyone, I want to end the call by just thanking Joe Fletcher who is moving on from his role as head of IR to a new role, critical role of CFO manufacturing. I think you'll all agree Joe did a great job in representing Lilly to the street over the last many years and we welcome Mike Zippar into the role, returning to IR actually after various rotations of the business. And it'll be an exciting time ahead with Mike as your main point of contact. So thank you all for joining us today and as usual, if you have follow up questions, please give us a call at the IR team and look forward to seeing everyone on the road over the coming months. Take care.",
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          "start_time": "01:04:25,570",
          "end_time": "01:04:46,760",
          "text": "Thank you. And ladies and gentlemen, this does conclude our conference for today. This conference will be made available for replay beginning at 1pm today, running through December 4th at midnight. You may access the replay system at any time by dialing 800-332-6854 and entering the access code 987.",
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Headers

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x-api-key
integer

Query Parameters

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limit
integer

Response

200 - application/json
OK

The response is of type object.