Closing Bell - Closing Bell Overtime: Huge Day Of Earnings; Freshworks CEO On Delivering A Great Quarter; King Street Capital’s Brian Higgins On Best Bets In A Topsy-Turvy Market 8/1/23

Episode Date: August 1, 2023

The S&P 500 and Nasdaq finished lower to start August but Caterpillar powered the Dow to a positive close. Vital Knowledge’s Adam Crisafulli breaks down the market action, including earnings from EA, Cesar’s, Pinterest, Starbucks, AMD, Devon Energy, Virgin Galactic, and Match Group. Wedbush analyst Matt Bryson breaks down the quarter and what’s ahead. King Street Capital Founder Brian Higgins joins in his first ever TV interview to talk credit opportunities in this unique market. Freshworks reported a strong quarter; CEO Girish Mathrubootham joins to talk how the company did it, how its winning more large customers and what it sees ahead.  

Well, the Dow hitting the highest level in 18 months, even as the S&P and Nasdaq finish the day lower. That is the scorecard on Wall Street. The action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Fort. Get ready for one of the busiest hours of earnings season. We'll get numbers in the next few minutes from AMD, EA, Starbucks, Virgin Galactic, Match Group, Pinterest, and so many more. Also, we're going to look for opportunities in the credit market when we're joined in a rare interview by Brian Higgins, a founder of credit-focused hedge fund King Street, which manages around $23 billion in assets. As we await those earnings, though, let's bring in Vital Knowledge founder Adam Crisafulli.

Adam, great to have you on. The S&P, it looks like, finishing the day here at 4579, down about two-tenths of 1%. It keeps rejecting that 4600 level. Are you surprised? Yeah, I think there's definitely a valuation issue in the market right now, both on an absolute basis. You know, just looking at PEs on an absolute basis, but especially relative to yields, especially on a day like today where you saw yields really jump. So you know in my mind I think

valuation is really the only major obstacle in the near term to this market. But fundamental news remains quite supportive and I think today was quite interesting how well stocks absorb the move in rates. I think part of that comes down to

the shape of the curve. So you're seeing a steepening out of the curve down to the shape of the curve. So you're seeing a steepening out of the curve reflective of a lot of the Goldilocks data that stocks have been responding to now for the last several weeks. And so I think obviously higher yields exacerbates the valuation issue with equities. But I think so long as the curve continues to steepen out, so long as you see supportive news flow on the data front, on the earnings front, you know, I think the market will stay relatively good. You know, it's a question of how much higher can it get from here?

It's like I said, there are definitely valuation impediments. Yeah, we had the Fed's Bostic on the tape not that long ago talking about that if the economy evolves as he expects, that this would be a comfortable advocating for, oh no, that's not the line I'm looking at. I'm looking at data that's consistent with an orderly slowdown, which sort of speaks to this Goldilocks data that we've been getting so far. Look no further than ISM manufacturing this morning, Jolt's reading today as well. Any reason to believe that that could change, especially when you do see things like credit tightening per the survey we got yesterday? Yeah, I mean, there's definitely obviously still the risk of a slowdown for a variety of different reasons.

You can argue that consumers have been sheltered from rate hikes. You know, you're seeing that in housing where a lot of a lot of mortgage rates are far below current market levels. You know, for a variety of reasons, you could say that there definitely are a lot of economic risks on the horizon as excess savings get exhausted, et cetera. But your bigger risk is that you see an acceleration in growth. Like you see with Caterpillar today, the biggest cyclical stock on the planet hitting all-time highs of 8% on earnings. That suggests that there is an acceleration going on in the underlying economy. And the risk then is that that pushes yields higher and that forces possibly the Fed to even doing more. So I think that's kind of, this point in time, at least, you know, your risk is more, I think,

that you don't have the type of disinflation area outcome that the Fed's really looking for, in which the central banks have to kind of reassess their outlook over the coming months. Adam, looking at some of these post earnings reactions, most recently Uber, you know, did pretty well, though it was a top-line miss. And it was down significantly. Microsoft did pretty well several days ago. It's lower. Is the bar just really high? How much of its valuation, how much of it might be sentiment as well in combination with that as we look forward to some more of these earnings coming out today

yeah definitely especially for tech you have a very high bar with some of these stocks obviously tech has been leading the market higher for the last several months so the bar has been high for higher for these names um you know i think too for a company like an uber microsoft you bring up two great examples you know microsoft reports a fully gap EPS number where pretty much everything is expensed into it. And then I knew we were looking at kind of this adjusted EBITDA, not on a per share basis. So I think investors at these levels with some of these stocks are looking for a little bit more honesty in terms of kind of what's being reported, the quality of underlying earnings to a certain extent. You know, your Amazons, your Apples, Microsofts, all those companies report kind of fully GAAP.

Everything is run through the income statement, whereas some of their smaller cap peers in technology, you know, get away with the more non-GAAP, you know, computation of earnings, which is, you know, obviously not apples to apples. So, you know, I think with tech, part of it is definitely a sentiment issue. And part of it is kind of, I think, you know, just really scrutinizing the quality of some of the actual earnings numbers. Adam, hold tight. Caesars Entertainment earnings are out. The stock is higher.

Contessa Brewer has the numbers. Contessa. John, Caesars revenue coming in slightly higher than consensus at $2.88 billion and earnings per share of $4.26 a share. That is not comparable to the estimate of $0.33 because largely it's attributed to a one-time non-cash gap tax gain during the quarter. Still, the company is pulling in same-store adjusted EBITDA. Remember, that's a key metric of profitability in gaming of slightly more than a billion dollars. And for the first time, Caesars turned a profit in its digital segment.

That's online and sports betting and iGaming. Eleven million dollars in same storm EBITDA beating expectations of two million. We are seeing some declines in year on year comparisons in bricks and mortar. But Q2 last year was Caesars' best quarter ever. And we do note that regionals came in better than expected here on the call. We'll get more insight into that consumer behavior. You mentioned the stock up 2.8 percent. And don't miss my exclusive interview with CEO Tom Riege. That's tonight on Last Call, John. Yeah. As you said, looking forward to that on last call now from casino style gaming to video gaming. EA earnings are out. Steve Kovac has the numbers. Steve. Hey there, John.

Yeah. Shares down about half a percent on those results. Pretty much in line with expectations. Although EPS coming in at a dollar forty seven cents, we're not comparing that to estimates. Revenues roughly in line. One point five58 billion versus the $1.59 billion expected. And guidance pretty good, basically in line for Q2 up to $1.8 billion. Street was looking for slightly above $1.8 billion as well. And then really crediting a couple game releases throughout this quarter, especially that new Star Wars game that came out for these results and continuing momentum around the FIFA game,

which is actually about to get replaced by their own in-house branded EA soccer game later this fall, John. All right. Stock down 3% initially, at least, on those results, though. Starbucks earnings are out. Kate Rogers has the numbers. Hi, Kate. Hey, Morgan and John. Mixed third quarter here for Starbucks. A very slight revenue miss coming in at $9.2 billion for the quarter versus estimates of $9.3 billion. Record revenues, though, up 12% year on year. EPS, a beat here, adjusted $1 versus estimates of $0.95 for Q3. Comps up 10 percent globally. That is a miss versus the 11 percent estimated by

analysts up 24 percent international. Also a slight miss versus analysts estimates of 24.2 percent growth up 7 percent in the United States. That is also a miss versus the up 8.4 percent. Analysts were expecting rather the company says it's seeing a 6 percent increase in average ticket in the U.S., 1 percent increase in average ticket in the U.S., 1% increase in average transaction in the U.S. On to China, a key market for Starbucks. Same store sales climbing 46% year-on-year in the quarter, driven by a 48% increase in transactions, but a 1% decrease in average ticket. Also, the company adding here 31 million Starbucks rewards members in the quarter. That's up 15% year-on-year. Again, the company adding here 31 million Starbucks rewards members in the quarter. That's

up 15 percent year on year. Again, the total number of rewards members rather is 31 million right now. Guys, as you can see, the stock is lower just under one percent. Conference call at five. We'll bring you any updates as we get them back over to you. All right. Kate Rogers, thank you. Let's bring Mike Santoli into the conversation. Mike, want to get your thoughts, whether it's Starbucks where North America was a key focus. Yes, we to get your thoughts, whether it's Starbucks, where North America was a key focus. Yes, we have a China recovery or reopening afoot, but analysts weren't putting quite as much stock into that as they were into resilience of the consumer here. For sure, Morgan. I mean, I think it's first of all, the backdrop is a pretty ungenerous earning season

in terms of stock reactions, even when the companies beat. And that's why I do think Starbucks, even though the stock hasn't performed well this year, is backing off on the comp miss. So you don't want to see the sort of loss in momentum relative to expectations. They're not necessarily a big story changer, but, you know, the stock's at about its average valuation over the long term. So it doesn't seem as if necessarily you'd built in that cushion for that slight comp miss. We'll see how it goes from here in the commentary, though. Electronic arts, similarly, without raising guidance, having beat slightly, seems like at least on Reflex, it's going to be a slight miss. So I think that right now we're in a market where most of the stocks have run pretty well. And you really want to see a clear trajectory toward earnings growth in 2024, into 2024, to start rewarding the stocks better.

Let me ask you more about that, because I asked Adam. I mean, but EA is down more than 4 percent, at least initially. We don't know how it'll shake out. That seems like a lot for just kind of not hiking guidance, Mike. So is it more of a valuation issue or might the sentiment in the market be shifting? I think it's all about that. I mean, look, some people say valuation is sentiment, right?

It's all kind of like what you're in the mood to pay for every dollar of earnings. So I think all that is in the mix. Now, I still think that if you're not going to be raising guidance, you know, after you've beaten in the one quarter, it's an implicit cut. I mean, we don't want to make too much of these small differences relative to consensus at this point. But I do think, you know, 4 percent is kind of the cost of doing business when you don't wow the street in the second quarter.

All right. Adam, want to get. Are we going to Pinterest? Pinterest earnings are out. Stay with us. Julia Borison has the numbers. Hi, Julia. On the bottom line, the company reporting 21 cents in adjusted earnings per share. That's being an estimate of 12 cents in adjusted earnings per share. Revenue also coming in better than expected at $708 million versus the $696 million expected. User numbers are pretty much in line, a hair ahead of expectations at 465 million versus the 463 million. That's the street account estimate. Average revenue per user, two pennies better than anticipated at $1.53. And Q3 revenue is predicted to grow high single

digits versus the estimate of up 7.7 percent. So perhaps a hair better than expected. We do see shares down about three and a half percent on this news. We're going to continue to dig into this and come back to you with more. All right, Julia Borson, thank you. Shares down right now. Don't miss Jim Cramer's exclusive interview with Pinterest CEO. That is coming up at 6 p.m. Eastern on Mad Money. And now Frontier earnings are out. Phil LeBeau has the numbers. Phil? Hey, John, this is a beat on the top and the bottom line. Frontier earning 31 cents a share, 3 cents better than the street in the second quarter.

Revenue coming in at $967 million. The numbers within the numbers in the second quarter, revenue per available seat mile down 14%, largely because passenger revenue increased 9%, but stage length also increased 8%. That's why you have the result of a drop of 14% in revenue per available seat mile. Cost per available seat mile down 5%, with a pre-tax margin in the second quarter of 9.1%. As for the guidance, the company now expects Q3 capacity of 21% to 23%, and they are expecting a pre-tax margin of 4% to 7% in the third quarter.

Lots to discuss with Barry Biffle, CEO of Frontier Airlines, tomorrow morning. A Squawk Box exclusive. Don't want to miss what he has to say, especially when it comes to domestic travel, guys, because they note in their earnings release they are seeing some pressure on domestic demand as more people pivot to international trips. Back to you. Sounds like what you got from Alaska as well, Phil. Thank you. And with that, let me get back to Adam Crisafulli.

Adam, Frontier slightly higher after hours. I will note a couple of weeks ago, this thing was trading about 10-ish percent higher than it is now. So maybe this goes, you know, to the pattern. This one had already come off a bit, unlike some of the other names that we've seen take a little off after earnings. As we look forward to AMD, probably the big name of today that is reporting, one that has had a nice run on some pretty high expectations of what it can achieve? No, absolutely. I think, you know, for AMD, a lot of people are looking for an update on their new, you know, their new AI chip, which is due out in Q4. We heard from Intel already. It sounds like the consumer, the PC markets are stabilizing.

The inventory has been, you know, the destocking process is finished. The enterprise, the legacy data center spending is still a little sluggish. But I think for AMD, it's all going to be about kind of the update on this new AI chip. Is it launching on time? How much will they have available for it to launch? What's kind of the preliminary demand indications? I think that's going to be the real, you know, the real area of interest for this quarter tonight on the conference call. All right. We got more earnings to bring you. This time it's Virgin Galactic, which has just become a revenue, officially a revenue generating company with its first commercial space flight at the end of last

quarter. Virgin reporting a loss of 46 cents per share adjusted. That was slightly better than estimates of 51 cents loss. Virgin Galactic revenues, though, those missed 1.9 million versus street estimates of 2.7 million. That's right, million, because as I mentioned, they're just starting to ramp up that service. Cash position, this is always a key metric for this company as it is beginning to ramp that commercial service. That remains, quote unquote, strong cash, cash equivalents, marketable securities of nine hundred eighty million dollars as of the end of June. That was a sequential increase of one hundred and six million from the first quarter. Company says that it is still planning to do its second commercial mission. This will be the first private astronaut mission on August 10th is what they're targeting.

The Delta class spaceships, which will be the next generation spaceships and sort of the class of spaceships that begins to get this company to a more regular cadence of space flights and thus towards free cash flow and ultimately profitability, that those are still on track to enter commercial service in 2026. Shares are down fractionally right now. John, this is not a name that really trades on the top and bottom line so much. It's really more on the guidance even now, even still. I mean, really, the guidance? I mean, this was once a $30-plus stock. Now it's $4. Like, you have to really just believe, like, beyond what's going to happen in a few quarters that the there is there.

Yeah. Especially given what's happening in space overall. Exactly. Speaking of, they did give guidance. Sees Q3, Q4 revenues of a million dollars each. Q3 estimates of $3.7 million. Q4 estimates of $5 million. So much lower than the street had expected.

And as I mentioned, we're talking about millions right now. Right. So you're believing in more than those millions. Makes sense. Adam, Chris, a fully version of a little bit of an outlier, but it does perhaps speak to the time that we're in where the stocks that people had a certain kind of hope in, they're looking at differently now. I will mention AMD earnings are out. We are going through them now as well. Adam? Yeah, I think for, you know, for the lottery ticket type stocks,

like a Virgin, you know, that's a very binary outcome. Like you said, you're looking, you know, you have to look years and years in the future. Very unclear at this point in time whether this is a viable, sustainable business. You know, I think more interesting is kind of... Got to interrupt you there

and get to Christina Patsinevelis, who has the numbers for AMD. Christina? We're seeing 58 cents adjusted EPS, which is a slight beat on 5.4 billion for revenues in Q2. Also a slight beat, but the concern right now

is Q3 revenue guidance, $5.7 billion. That is a little bit lighter than what the street was anticipating. In the report right now are AI engagements. This is a quote, increased by more than seven times in the quarter as multiple customers initiated or expanded programs supporting future deployments. And then they say that they're pleased with the second quarter execution. So a beat on the top and bottom line, but Q3 revenue guidance comes in a little light. And gross margins for the quarter was 50 percent, which fell in line. John?

Christina, yeah, I'll also note it looks like data center revenue came in at $1.321 billion. That's pretty much in line, maybe a little light of what was expected. Client, though, that's consumer and business PCs. The PC business came in a lot stronger. So in that way, similar to Intel. Intel actually did a little better than expected on data center, but was very strong on client. AMD, very strong on client as well, Morgan. You think that's why the stock's up almost 5% right now with the initial reaction?

You know, I think people might have feared a bigger data center miss from AMD, given that Intel was talking about gaining some share. So there might have been some fears there. We'll see where the stock shakes out. But this overall, you know, shows that AMD is still chugging along, doing its thing, right, and running ahead of some of the competition here. All right. I thought that stat was interesting as well, about a seven times increase in engagement around AI for the quarter, too. Let's bring in for some instant reaction. Matt Bryson, Wedbush analyst covering AMD. Matt, so data center, perhaps not too much of a problem. I don't know if that number being a little bit light of

consensus, if you're taking little issue matters. Embedded also pretty much in line, gaming in line, but that client number strong, similar to what we saw from Intel, but AMD, of course, has been getting share. Yeah, no, I think that's exactly right, right. We got what we saw from Intel. Actually, their enterprise number was slightly ahead of my expectation, but I really think it's going to depend on what they give us during the call, even more than guidance, the commentary they give us around what they expect from data center, both in the second half and then 2024, is, I think, really what's going to dictate what the stock does from here. What about this accelerator effect that we heard about from Intel, where the hyperscalers are

spending more on AI, and for them, that's meant more on NVIDIA versus Intel. I guess in a way you're seeing maybe some of that reflected in AMD's data center numbers, but how much does the commentary matter around that? Oh, I think it matters a ton. So I think it both matters in that AMD has set up a relatively aggressive trajectory for data center in the back half with the numbers they gave us. It looks like if they're going to keep that guidance, you're going to have to see a sharper lift in Q4 for that data center group. At the same time, it's going to matter what they have to say around AI for 2024. I think one of the things that really worked out well for Intel was talking about having a billion dollars plus in backlog

that would hypothetically ship in 2024. If AMD gives us similar or better commentary, I think that's going to matter for the stock. All right. So if you get commentary like that, I realize you already have an overweight on the stock, $145 price target, which represents some significant upside from here. The promise of AI, at what point do you need to see it actually realized for an AMD? I mean, for AMD, they have to deliver within the next few quarters in the sense that they really have to begin shipping MI300. It has to begin turning into revenue. But at the same time, they've already carved out a space, particularly in supercomputing, where other than Nvidia,

they are the AI silicon of choice. So I think right now they are in second place, and if they can maintain that position, hypothetically, they can tell us that they're looking to ship more than a billion dollars next year. So what are you gonna ask Lisa Su on the call? Where is MI300 and what does revenue look like next year? And on that data center side of things, on the CPU side where it seems like you have an advantage against Intel, when do we get to see that advantage manifest in the next wave of revenue

growth? All right. Matt Bryson, thank you. Thanks as well to Adam Crisofulli. And of course, Mike Santoli, we will see you in just a bit. Got to mention, don't miss an exclusive interview with AMD CEO Lisa Su. That's tomorrow, 9 a.m. squawk on the street. And I'll mention Freshworks, earnings are up, that stock popping higher. All right. Well, still ahead, a top analyst weighs in on earnings results from Starbucks and what he wants to hear from management on the call at the top of the hour. Up next, we will talk with hedge fund founder Brian Higgins from King Street Capital Management about the most intriguing opportunities right now in the credit market. Welcome back to Overtime. We're not done with earnings. Match Group, those results are out. Julia Borsten has the numbers. Hi, Julia. Match beating on the top and bottom line,

reporting earnings of 48 cents per share versus 45 cents estimated. Revenue is also coming in stronger than expected at $830 million versus the $811 million that analysts had anticipated. You see shares are now up 12.5%. I also want to point out that the company's third quarter outlook for revenue is stronger than anticipated. The company providing a range of guidance between $875 and $885 million versus an estimate of $864 million. So above that range. And we see that's certainly boosting shares right now. Back to you. All right. People getting out, meeting folks, having a good time. And now we've got a pair of earnings from the energy sector. Pippa Stevens has the details. Pippa. Hey, John. Well, starting here with Devin reporting $118 on an adjusted basis for EPS.

That was in line with analyst estimates. While revenues were $3.45 billion, that was a miss and down 38 percent year over year. The company did say that it reached 323,000 barrels per day during the second quarter, which was a record high, and they also announced a $200 million buyback during the period. Moving over to Pioneer, it was a beat on the top and bottom line. EPS coming in at $4.49 on an adjusted basis ahead of the $4.18 expected. Revenues at $4.6 billion, also a beat there. And Pioneer said that it bought back $124 million worth of stock during the second quarter.

Back over to you. All right. Peppa Stevens, thank you. Let's turn now to credit. Atlanta Fed President Raphael Bostic saying last hour that his baseline outlook is for no rate cuts until the second half of 2024 at the earliest. Our next guest says higher rates for longer opens up opportunities in the credit market. Joining us now is Brian Higgins. He is the founder and managing partner of King Street Capital Management, a global alternative asset manager with about $23

billion under management. First time on TV, too, if I'm correct. So welcome. Well, thanks for having me. So I do want to get your thoughts on that. Before we get into the actual opportunities around credit, the fact that you do have the soft landing narrative that has not only seized the market, but is making its way out in the Fed speak we've been getting in recent weeks, too. Do you see it the same way, or is this the calm before the storm? Well, we're credit investors, as you noted. And as such, we look at the world as half empty versus half full. And so while we're constructive in certain areas of credit, it's really about dispersion.

And so if you think about monetary policy, the transmission system occurs through refinancing. And if you look at the loan market, that's been able to happen more quickly because they're floating rate instruments and they're shorter duration. However, if you look at investment grade, much longer duration, high yield, longer than loans, but shorter than IG. And so there'll be time as these refinance and those rates will go higher. And then you'll start to see the pinch in the credit markets. I think some of the lenders, as you noted earlier, are pulling back and higher credit standards. On top of that, Basel III regulations, the Fed's coming out with new guidance and rules there. And so the capital for the banks and the regulatory environment would mean there's tighter credit standards. And so

banks in general, it's a challenge for them because their cost of capital, they need sort of 10, 12 percent. And so on that, that creates great opportunities. We're a long, short credit investor. And so dispersion is good for us. And we're excited by that. OK. I mean, we could talk about the wall of maturities. We can talk about leveraged loans, which are starting to get a little more attention as well. Are there are there areas in this market that are concerning you as well as providing opportunity right now? I guess when you talk about dispersion, how are you thinking about that? Well, if you look at the overall indexes, the high yield index,

you look at the investment grade index, most of the returns come from the base rate, not the spreads. And so as you roll forward and think about if we do have some sort of slowdown or rates go down, you're locked into these rates. Either way, whether through a credit or rate perspective, it's going to be a challenge. And this comes on the heels of two years where the investment grade indexes had down years,

which hadn't been happening in generations. And so we want us to be mindful that you're making these longer-term bets in fixed income securities. You need to be compensated for it. And so we try to price illiquidity. And we look at what the credit markets are doing, what the underlying companies are doing, and why there's, you know, a strong top line.

I think it's important to note within these high-yield and investment-grade markets and loan markets, there are difficulties, and that's the beginning. We call the worst go first. OK, so so if I'm a company right now looking to issue debt, I think part of what you're saying is I've got to pay better, right, than investment grade, than, you know, government bonds. And so it's going to be expensive for me. So if I'm playing at home, can I buy riskier corporate debt right now? Or is that dangerous? Do you want to wait until you see how both the Fed and the consumer for the rest of this year pans out?

Well, as you said, there's a lot of debate on the economy and the base rate being quite high. If you look at short duration, we're looking at short duration, higher quality liquid situations, which produce high single digit yields. And so if you're at home and you say, I want to play the risk-free rate four or 5% when you're used to getting zero for quite some time, that's quite attractive. And I said earlier, the spreads as relates to high yield and investment grade, you're not getting as much as historical. And so if you look at the lending, if the banks are right and they're saying, OK, things are going to get more difficult, generally speaking, the economic expectations are lower. The spread should be higher. And that's sort of the forward curve. So default rates have been

quite low. But if you look at the low market, think about a low market. We went from three to six percent in defaults. Right. Recovery rate only 20 cents on the dollar. Traditionally, that's 70 cents on the dollar. So that would be concerning to me going first. Correct. So if the economy does sour, though, even if we get the Fed stops raising or even cuts a bit, if the economy goes south, riskier companies are probably going to be at greater risk. So they might still have to pay more, right, for capital. Correct. And think about the government, right? We're running at trillion and a half.

If you exclude the student debt, trillion eight. That's going to be larger. And so there's a competition for capital. The government needs funding. The economy and certain companies need funding. And so there's a competition for funding that will force or keeps rates at a higher level. So what does this mean for you? Because you have the hedge fund,

credit-focused hedge fund, but you've also expanded beyond that. You've got collateralized loan obligations. You've got real estates. You've got growth lending you've been doing as well. How much, I guess, how much does that provide an additional opportunity right now? How are you balancing that against what you've been doing for three decades? Well, we've always done all of these activities within our business. And so it's just, and always looking at it as things come in, we're agnostic, right? We're up and down the capital structure. We're a global firm. We really try to figure out what is the best risk reward. As I said, being a long short credit business, we're able to price illiquidity. So to the extent we want to extend credit and be out on the longer duration,

we need to get compensated for that, given the uncertainty, whether it be rates or the economy. CoStar's CEO was just here giving us some data on not just vacancies in office, but space that might be sort of getting paid for, but nobody's occupying and how dangerous that is. Are you sort of eyeing, circling the office market looking for bargains to happen? How are you treating it? Well, the office market, as everyone understands, whether it's a big city or it's, you know, suburban, it is certainly very difficult. I think the cities

are going to be concerned because they're looking at the tax revenue and there's a lot of zoning regulations if there are alternative uses that you were to look to deploy in those sectors. We're looking more on the financing side of it versus the equity side. So we're staying senior in the capital structure. There is definitely a difficulty in pricing because you have 60 percent less transactions. So the transaction volume is followed. So there's a price discovery that needs to go on. Again, monetary policy happens to a transmission of refinancing and repayment. And valuations at the moment

in certain sectors, illiquid sectors, are still finger in the air. And so we know there's secular challenges, potentially secular challenges. It's an office market is certainly difficult to predict. And so I would exercise caution in that sector. All right. Brian Higgins, it's so great to have you on. We appreciate your insights today, and we hope you'll come back and join us again. I really appreciate talking to you.

Enjoyed it. Thank you. Good to have you. We've got more earnings. Elf Beauty, those results are out, and Courtney Reagan has the numbers. Hi, Courtney. Hi, Morgan. Yeah, earnings and revenue beating pretty strongly here for Elf Beauty, reporting $1.10 adjusted.

That compares to analyst estimates of $0.56, with revenues coming in at $216 million compared to $184 million. A pretty strong quote in here from the CEO talking about sales growth and market share gains. The 18th consecutive quarter delivering both net sales growth and market share gains in one of only five publicly traded consumer companies out of 274 that have grown for 18 straight quarters and averaged at least 20 percent sales growth per quarter over that period. I spoke briefly with the CEO, who is also raising the full year guidance for both earnings and revenue and said would have raised earnings even higher. However, they intend to increase their marketing spend as a percent of sales going throughout the remainder of the year compared to this quarter

and also called out how strong their beauty business is at Target, saying the Targets that now have the Ulta beauty stations, even though they're not in that section of the beauty department, are even stronger than the Target stores without that section. They believe they have the opportunity to double the market share, according to the CEO, Terang Amin, if other retailers follow this Target playbook with Elf Beauty. Morgan, shares are screaming higher, higher by almost 15%. Back over to you and John.

All right, Courtney, thanks. We've got the mirror image of that pop higher. SolarEdge earnings are out. It's plummeting. Pippa Stevens has the numbers. That's right, John. The stock is now down 11%. This really comes down to the weak third quarter guidance. But let's start here with the Q2 results. It was mixed. SolarEdge earned $2.62 on an adjusted basis, which was $0.10 ahead of the $2.52 estimate.

Revenue, though, slight miss here, earning $991 million against an estimate of $992 million. But once again, it is that weak guidance. So for the third quarter, SolarEdge predicts revenues will be between $880 and $920 million. That is short of the $1.05 billion that analysts were expecting. The company said that the U.S. residential solar market is seeing some headwinds primarily related to higher interest rates. So that does mirror what we heard from competitor Enphase last weeks primarily related to higher interest rates. So that does mirror what we heard from a competitor Enphase last week. Back over to you, John. Yeah, we were just talking about interest rates and how they apply across so many different areas.

Pippa, thanks. Up next, Mike Santoli taking a look at what we learned from today's JOLTS job openings data in front of Friday's jobs report, plus a lot more on today's after hours movers. You can see AMD there, the sole name we're showing that's higher when overtime comes right back. Welcome back to overtime. Some data coming in today pointing to a stabilizing labor market. The JOLTS report showing a decline in job vacancies and layoffs in June. Job openings hitting their lowest levels since April 2021. Senior markets commentator Mike Santoli is back with his take on those results. Mike?

Yeah, John, kind of an orderly cooling off of the labor market, which is certainly what the Federal Reserve would like to see. You don't want to see unemployment shoot up, but you want to see less tightness there. And that's what we got. Here's the quits rate, which is sort of below the surface part of the JOLTS report, which shows, obviously, of total employment, how many job separations were there at the choice of the workers. So the quits rate now has been on the decline, as you see.

And what's marked here, the Indeed folks have marked a 2019 average. That's basically pre-COVID norms. And we're slouching right toward that levels. If you see right here, this one, you know, Jay Powell of the Fed was very concerned that labor workers had too much power. They were just jumping from job to job, pushing wage growth higher. That's a good thing for the overall economy, but tough if you want to get inflation under control. So the hope here is that we can maybe settle around these levels. The three month average is kind of moderating as well. And that would be in support of that soft landing type outcome for the economy that everyone seems to be pretty well on board with at this point.

I love that you highlight the quits rate specifically, since we know job openings can be sometimes not always aligned with what's actually happening in the marketplace. Right. Job openings. There's a line of thought that says it's really cheap for companies to just keep posted job openings out there. There's really no downside to it. You can send them a message that you're still a growing enterprise and yet maybe you're not working that hard to fill those jobs. This is people who are actually leaving a position or, you know, you could have two jobs and leave one, that kind of thing. So, yeah, this is real action on the part of workers. All right.

A little Bell aftershock there. Mike Santoli, thank you. Thanks, Jim Cramer, for that one. Shares of consumer software maker, sorry, customer service software maker Freshworks popping up about 7% after beating Wall Street's profit and revenue estimates. The company also seeing stronger than expected full year guidance. Up next, the company's CEO is going to break down the quarter with us before he hops on the call with analyst. That's G. Matthew Brutham. We'll see him when Overtime returns. Welcome back to Overtime.

Look at shares of Freshworks up there 15 percent. Cloud-based customer service software provider topping Wall Street. Estimates for earnings and revenue. Q2 revenue of 145.1 million. That's up 20 percent in constant currency. Non-gap EPS 7 cents. Free cash flow 18.1 million. That's up 20 percent in constant currency. Non-gap EPS seven cents free cash flow. Eighteen point one million in the company. Also guiding to Q3 revenue of one hundred forty nine to one hundred fifty one point five million. That's one hundred fifty point two five at the midpoint in line with consensus. But taking the full year guide higher to a midpoint of 591 million. That's versus just over 586 expected.

Joining us now, Freshworks founder and CEO Girish Mathur-Bhutham. G, good to see you. And the stock quite a bit higher. Now, your back office software handles things like marketing, customer service, CRM, automation. What drove the beat in this particular quarter and how are you doing on those customers spending more than 50,000 on your platform, the kind of bigger ticket customers?

Thanks for having me, John. And yeah, I feel really good about how our team executed in Q2. So we outperformed all of our key financial metrics, whether it's revenue, operating profit, or free cash flow. So broadly, I think our field business really grew, especially in the ITSM business. We continue to see strength where customers are choosing Freshworks. Our value proposition of great products, great UI, and great prices is actually resonating more and more

with larger enterprise customers. So that is what drove a lot of the growth. And it's heartening to see that while the macro economy, I think, is still stabilizing, but our net dollar expansion came ahead of our expectations. So we're overall happy with the way things are going. Now, when I talked to you last quarter, you told me that it

was B2C, business to consumer companies, that were driving a lot of the activity. And we can see the consumer is still spending, which I imagine helps, but also that there's this pressure to save money, to be really efficient with software that works, and you felt that that was helping you gain share. What's the update on how that panned out for this quarter and how that plays into your expectations? I think one of the big changes in this quarter is the excitement we are all seeing around AI and we in June we had our AI launch event around Freddie where we actually lined up three key pillars of our AI strategy which is around Freddie self-service for customer and employee self-service, Freddie co-pilot to help our agents

use AI to their benefit and then Freddie insights for leaders. I think there's a lot of excitement. We are seeing both interest from both B2B and B2C companies, like Smartsheet is a B2B company, which is an early adopter of our AI for their employee self-service. We are seeing a lot of B2C companies use that. So I think we are broadly positive about the excitement that's being generated with the earlier adopters around AI. You got some competition with ServiceNow in how you do back office stuff. They also had a pretty strong quarter. I spoke to Bill McDermott the day of that report.

How are you competing and what is the basis of your wins when you're going up against other players in this space? So we are one of the most credible alternatives for service now into the market. And I think their focus is more on the Fortune 500. And our focus at Freshworks has always been about building software and AI for the Fortune 5 million, not just the Fortune 500. And with specific to our ITSM product-based service, we actually see a lot of adoption in the mid-market and lower end of enterprise. We continue to win. We are the modern cloud-native provider built as a single stack across ITSM, IT operations management, and everything that you need for a modern employee self-service. So I think customers are really liking that fact. Quickly, near-term or longer-term AI impact on top-line revenue? So we believe that we are going to be a beneficiary of AI,

specifically around all the three areas that I mentioned. As businesses adopt more and more automation, our Freddie self-service, we are going to monetize from August 3rd. There is a new product launch happening. So we are announcing monetization for that. We expect that revenue to grow. Our Freddie co-pilot, it's an early adopter. It's going to be priced at $29 per agent,

and we are planning to monetize it on a later date. Okay, Jay. And then we'll follow it up with Freddie Insights. Got to leave it there for now, but hey, the stock higher by more than 20% right now after hours. G. Mathrutham, CEO of Freshworks. Thank you. We have breaking news on former President Donald Trump. Let's get to Eamon Javers in Washington with more. Hi, Eamon.

Hey there, Morgan. The former President Donald Trump just posting on social media just a few moments ago that he expects to be indicted in about 10 minutes time by the special counsel, Jack Smith. The former president calling this prosecutorial misconduct in a social media post that appears to be designed to sort of pre-butt any indictment that may or may not be coming. The former president says, I hear that deranged Jack Smith, in order to interfere with the presidential election of 2024, will be putting out yet another fake indictment of your favorite president, me, at 5 p.m. Why didn't they do this 2.5 years ago? Why did they wait so long? Because they wanted to put it right in the middle of my

campaign. That coming just a few moments ago from the former president of the United States. We don't have information right now, Morgan, to confirm whether or not such an indictment is indeed in the offing. There's been an enormous amount of speculation here in Washington over the past several hours that something might be coming. But other than the rumor mill, we can't say for sure that Jack Smith intends to do the thing that the former president says now he intends to do. So we'll wait and see. But you now have the pre-buttle anyway from the former president of the United States, Donald Trump. Morgan. All right. Eamon Javers, thank you. You bet. Well, it's been a wild hour of earnings and it's rolling on. Up next, some of the key after hours movers that

need to be on your radar. Stay with us. Welcome back to Overtime. Here's a check of some of today's key after hours movers. AMD beating on the top and bottom lines. That stock is higher by about 4% right now. EA and AIG are both lower following their results. EA is down about 3.5%. Take a look at MicroStrategy as well, reporting earnings per share of 152 on revenue of $120 million. Those shares are down about 1% right now.

But CEO Michael, chairman and co-founder Michael Saylor will be joining me tomorrow at 10 a.m. on Squawk on the Street when I fill in on that hour. John. Be sure to ask him about Bitcoin. Okay. A wave of earnings calls about to begin. Up next, a top analyst tells us what he wants to hear from Starbucks when we come right back. Welcome back. Starbucks stock is falling slightly after reporting results earlier this hour.

The earnings call kicks off in just a few minutes. Joining us now, Stevens analyst Joshua Long. Josh, what are you looking for on the call, especially as we did see this reigniting of China's same-store sales, but North America missing the mark? Absolutely. Thanks so much for having me. What we're looking for is conversation around this all-around brand momentum. So although the top line did disappoint, slightly you have to think about it in the context of the overall results. And when you look down the middle of the P&L and

the margins, those were much better than expected. So I think that sets the stage for some strong momentum into year-end and then possibly a better story here into fiscal 24. Okay. In terms of pricing power for Starbucks, how much does that matter here, especially if you do start to see some commodity costs come off? No, that's a great question. I think at the end of the day, the way that we're thinking about it is Starbucks is the epitome of an all-around kind of affordable luxury for consumers. So although prices have gone up over the last couple months, I mean, thinking about that core Starbucks coffee experience, at least here in the U.S., and the strong transaction trends that we've seen, I think that that overall occasion is really insulated. And I think as long as you continue to see brand innovation, product innovation, and then leaning into that really strong loyalty program, I think that's where we can really see some upside going forward. Okay. Josh Long, thanks for joining us ahead of

the call, which kicks off in about 15 seconds. Yeah. I'm looking forward to Qualcomm and Etsy tomorrow. Qualcomm after what we've seen for the chips and then Etsy, you never know. Yeah, DoorDash will be one to watch too after Uber today. That's going to do it for us here at Overtime. Fast Money starts now.