The Best One Yet - “Everyday is the weekend for Spotify” — Boeing’s $7B cash burn. Streaming Trolls (our sequel). Spotify’s earnings insights.

Episode Date: April 30, 2020

We listened in on Spotify’s earnings — shares jumped 12% even though you’re not commuting and now love audio meditation. Boeing’s earnings update is a case study in how cash flow is a science, and cash burning is an art. And fresh after we told you Universal Pictures’ “Trolls 2” would change movie math, the movie theaters just responded with the most aggressive open letter we’ve ever seen.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. It is Thursday, April 30th, last one of the month. I got three words for you. Gross, domestic product. We call it the bench press of the American economy. GDP.

This one, though, typically doesn't need a spotter. It's usually inching up like 2 or 3%. Last quarter, though, America's bench press dropped by 4.8% because of the disruption from COVID-19. But GDP's like your buddy Timmy who's always late. We knew it was going to be a bad quarter. We didn't need GDP to tell us. The investors ignored that and focused on news that Gilead's drug remdesivir, there's a third

trial that suggests it may have benefits in treating COVID-19. If you don't succeed at first, go for the third time. Stock surged over 500 points. We're just hoping this thing comes in loisage form because, you know, everything's better like that. Lawsages are basically candy. It's the best thing to have. Speaking of the best, this is the best one yet. Our first story, Spotify is listening to you, listen to it. So, Jack, and I tuned in to listen to its latest earnings report, the right thing to do high volume. The CEO of Spotify says every day feels like the weekend, according to his date.

Exact quote, commuting is down, meditation is up, and so is the stock. For our second story, I'm going profound. Cash is king. Snackers cliches are 80% of every accounting class in business school. You can't get a bachelor's degree in finance without branding your butt cheek with a cash is king. Meanwhile, Boeing's earnings report are a case study in the science of cash flow. And the art of cash burning. Jack, third and final story for us, please.

Now presenting Trolls 2. The sequel, our sequel. To The sequel. Part 2. Season finale. Series finale. Yesterday we told you how Universal Pictures Trolls World Tour would change movie math forever.

Now AMC Theaters has responded with honestly, the wildest open letter that Jack and I have ever seen. Things got personal. We're talking pendulums versus disruption. But before we hit those three stories, times have changed. since three months ago, when Baby Yoda almost brought down the Hasbro toy company. This was insane. Disney didn't tell Hasbro, their partner, that they were creating an adorable new

Star Wars character. And Hasbro didn't make that Star Wars toy in time for Christmas. Parents got angry, kids stopped believing in Santa. Hasbro's earnings were terrible. But yesterday, Nick, Hasbro updated us. It's living the Baby Yoda free lifestyle and it's winning. It's like your buddy who's single now. They're just doing crazy stuff. You're like you don't even know this person. Hasbro just told us and it's a little. latest turnings report that Jenga is its new baby yoga. Monopoly is the new Ticklemyelmo. Operation the board game requires no PPE gear to play in your living room floor. Play-Doh, more like plain mo. Come out with a scent for this stuff. It's beautiful. Love it with

sprayed on us. Magic the Gathering, those cards, it's cool. Again, although I never, never lost its coolness in my book. Turns out non-screen games for Hasbro, their sales search 25% in the last three months. What about screen game sales? Hasbro's like, Like yeah, forget about the future. We're just going back to the past. This will work for us for like the next few months. Hasbro's board games have probably saved multiple families during this crisis. Also brings up the big question, have we hit peak Netflix?

Let's get to our stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. It's snacks about to hear rain food. It's air candy. They don't reflect the views of the robberhood family. It's all informational just so. We're not recommending any securities.

It's not a research report or investment advice. Not an offer or sale of a security. Right. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member Fenra slash SIPC. For our first story, Jack, team Minaj or team Cardi? Please, Cardi B.

It's always Cardi. We know she's listening. She's a great snacker. Spotify looks a lot like Netflix with its latest earnings report in the corona economy, except for three key differences we want to hit. But first, if you know how people listen, you know how people listen. You know how people listen. Excuse me, Snackers. My co-host has been replaced by Gandhi.

That's the best quote from a CEO we've heard yet. Every day now looks like the weekend. That's what the CEO of Spotify just said. Daniel Eck is pointing that out because commuting is gone for many of our lives. So every day starts and finishes pretty much the same with us in our apartments or with us in our homes listening to Spotify. Which is why Spotify's podcast listening is down a little bit overall. you're not on the fortrain on your way to work. Instead of listening to podcasts in the car and through a smart watch,

Spotify points out that streaming on smart TVs and video game consoles are up 50% last quarter. We're talking same ears, just new hardware, nice moves. They also pointed out this juicy nugget. Trending searches on Spotify are for instrumental, chill, and wellness. This is like the lo-fi beats playlist you hear at 3 p.m. out in Montauk.

You know, when they've got like the keyboard, you got the saxophone, and then you got someone like humming a little bit. You just want it in the background. You don't want it like actually being the main event. It feels like Tulum in the living room. So we're looking at the King video streaming company and the King audio streaming company. And that's because Netflix and Spotify, they have some very interesting similarities.

Both cost about the same. Yeah, we're talking like, you know, you get $10 a month for Spotify. You got your $13 a month to splurge for Netflix. Both are streaming. One's audio, the other's video, but they're both using the internet. And both are thankful that their core business hasn't been disrupted much by the COVID-19 situation. But what fascinated Jack and I when we jumped into the earnings report from Spotify was the key differences with Netflix. Spotify doesn't own much of the audio content that's playing through your headphones.

The record labels do. So Spotify has to give most of its revenues to the labels which rep the musicians whom you're listening to. Right. And they ultimately should be paid if you're listening to Cardi B, right? Cardi says yes. And Netflix has tons of original content, so it gets to keep more of all that revenue. arguably too much original content. Do less Netflix, do less. Stop throwing things up on a dartboard. Another difference between Spotify and Netflix,

Spotify has a free version that's supported by ads that you have to listen to every three songs. And that means that Spotify is pretty vulnerable right now when it comes to the adpocalypse, but Netflix isn't. In fact, ad sales for Spotify dropped by 30% from last quarter. The final key difference is that Spotify, they crack down on moochers and they crack down hard. Have you tried signing up for a Spotify fan?

family plan. If you have like I have, you wonder why they ask for your home address. That's because they're going to cross-reference the internet IP address with whoever else you claim is in your family. You get a call. It's a random Swedish number. Boom. They're asking you what color hair the wife has. Meanwhile, Netflix is like, if you don't tell, I won't tell. So Jack, what's the takeaway for our buddies over at Spotify? Spotify has one key metric, and that key metric is looking good. Snackers, just like a Bobby Dylan album, the earnings reports, they're completely. You look back on these things 30 years later, you've no idea what you understood them. But instead of getting buried in the weeds of Bob Dylan's lyrics, there's only one key

metric in the Spotify earnings report that investors care about the most, and that is the number of paid subscribers. These are the subscribers who are committed enough to pay up like $10 a month instead of taking the freebie version. We're not judging you. Feel free to do either. Paid subscribers rose by 31%. There are 130 million people subscribed to Spotify.

Spotify Nation's gotten pretty big. and that's better growth than the 29% last quarter. That strong performance is the one key metric that boosted the stock by 12%. Paid subscribers. For our second story, row 33 middle C-crying baby, Boeing is a case study in cash flow. It's why the stock jumped by 6% on Wednesday. All right, Snackers, we're talking about Boeing, which means we got to talk about the one-two punch situation it's going through.

Well, punch number one, the 737 max disasters, led to its planes being grounded worldwide over a year ago. No joke, its profit puppy is filling up giant parking lots outside the plant. The second punch, coronavirus means nobody is flying anywhere. They got a 48% plunge in airline sales, you know, because they got to sell their airlines to the airline companies. When the airplane only has like five ticketed passengers, are they still doing like, we're now seating Group B, Group C, Diamond Medallion?

Are they still doing that? Or they're just letting everybody on. There is no status in the corona economy. True. But all anybody wants to talk about when it comes to Boeing's most recent earnings report is cash flow. Cash flow, cash flow, cash flow, literally how much money is flown in compared to how much is flown out, our favorite term in financial literacy. Spoiler, Boeing has no cash flowing in.

There's nothing coming in, really, seriously. For Boeing, it's a cash burn situation. Money's going out. Yeah. And nothing's coming in. Even though its plants are closed and nobody. he's buying, it still has expenses just like everyone else. It's got to pay back monthly debt repayment. It has to pay interest on that debt. It needs to pay workers' salaries and benefits. And it needs

to keep the lights on and make sure the planes don't freeze. It's like someone who got laid off from their job, but you still got to pay the rented home. So investors are like, okay, we expected this, but still, let's compare Boeing's last quarter to the same quarter one year ago. Literally, they're pulling up Boeing. They're like, all right, let's look at Boeing, let's look at Boeing, and let's compare Boeing to Boeing. This quarter last. year, Boeing was cash flow positive. It had $2.3 billion of cash flowing in. But in the same quarter this year, aka the last three months, it was $4.7 billion in cash flowing out. The opposite. That's a swing of $7 billion difference in cash flow and not in the right direction. Okay, so now the analysts

they're like, okay, we compared Boeing to Boeing. This is not the same Boeing we used to know. Let's compare Boeing to some other companies that are having some problems right. Boeing is burning about $2 billion of cash per month. Turns out that's twice as much cash burn as Carnival cruises. Now the analyst is like, okay, Bowen, you didn't look good compared to last year, and you're not looking as great compared to your peers. Parked airplanes, parked cruise ships, both look bad. You never want things parked in a moving economy.

So, Jack, what's the takeaway for our buddies over at Boeing? Cash is king. Cash is extra king when it comes to the coronavirus. Boeing burned $4.7 billion in cash, but the show. shares ended up popping 6% because investors thought they'd burn like way more than that. Investors are nervous because if they run out of cash and can't pay next month's expenses, that's called bankruptcy and that's when stock prices go to zero. But here's the funny thing about cash and cash flow. They're different things.

So even though Boeing has no business right now and cash flowing out, it's got like a 747 full of cash it's hanging out with. It's sitting on a pile of $16 billion in cash across its probably like 30 or 40 bank accounts, plus a credit card with a $10 billion credit limit. Oh, and by the way, the government may even bail them out if they end up needing it. Let's be honest, the government would bail them out before letting them, like, die. Boeing's losing cash now, but it still has a mountain of cash to burn before bankruptcy becomes a thing. Snackers, we're about three-fifths of the way through this podcast, which is more than half.

So if you're running out and running back, time to run back. For our third and final story, yesterday, we went over with you how trolls to the movie would forever change movie math. And then after that, movie theaters responded aggressively with a hate letter to the movie studio. We've never done this before. We've never whipped this up. But this is our sequel to yesterday's story on the trolls movie sequel that was a movie

after another movie. Feels like a Christopher Nolan screenplay we just whipped up. Let's do a quick reminder on the movie math we discussed yesterday. Okay, so Snackers, when movies like Trolls 1 go to theaters, they got to stay in the theaters for like a 75-day minimum, and the producer and the movie theater, they do a 50-50 split on the money. And when other movies like Trolls 2, Trolls World Tour, they go straight to streaming, which is happening right now.

The movie studio takes an 80% split and only 20% goes to the streamer, like Apple, Amazon, or YouTube. I kind of feel ashamed we didn't mention the World Tour part when we first and introduce this story. It's actually quite a tongue twister. I don't want to ever say it again. We never have to because we're stopping it too. Now, trolls two earned more money in three weeks of being online only with rentals than trolls one did over five months in movie theaters. So naturally, the Universal Pictures CEO said, we're definitely going to do this again because it worked really well. He's like, hey, hire some engineers. Can we make this just go straight to people's

phones? Can we do this before the movie's even done filming? But then after we recorded yesterday's studio and you listened to it, AMC responded angrily. No joke, there was an open letter from the CEO, Adam, of AMC. We're just going to leave it to Adam because this was aggressive. And Adam went through all eight levels of human hate. You could take Adam's open letter and turn it into a Bravo show. Adam opened up with faux charm with Dear Donna, because this is an open letter. It should say, Dear Donna and everyone else I'm trying to shame you to, Donna. Literally began with Dear Donna, who's the head of Universal Pictures. But then there was like a little bit of empathy.

At this time of national emergency, I hope you and your loved ones are healthy and safe. Feel slightly passive-aggressive, but we're going to give Adam the benefit of the doubt on this one. But then Adam took a nasty little pivot in this open letter. I wish we were spared from also having to address a different issue that arises from Universal's actions currently underway. Okay, so at this point, Jack has gone to like get some popcorn.

I've got ice cream out. We're just reading this letter, having fun, and kicking down. because from pivoting to frustration, this turned to anger. We want to be absolutely clear. Universal is breaking the business model and dealings between our two companies, and you assume we will meekly accept this reshaped view? Now, first of all, I want to point out Jack does a fantastic Adam, but this is when things change to an aggressive final conclusion finale.

I hereby proclaim effective immediately. No more Universal movies in any. AMC theaters ever. And just like that, Adam became some type of 19th century British Lord, but the entire letter aggressively laid out a bold new plan. That letter sounds crazy, but the CEO of AMC theaters was so mad at Universal for cutting them out of the deal with trolls too that they wrote that letter. And Snackers, you know who definitely doesn't think this is crazy? Investors, AMC stock jumped 26% because the CEO declared war on Universal. So Jack, What's the takeaway for our buddies over in the movies like Universal and like AMC theaters?

Beware, the pendulum of business partnerships is always swinging. Snackers, you know that 80-20 movie math we told you about? That looks pretty juicy for producers like Universal. That's because streamers like Apple, YouTube, and Amazon, they are really trying to offer a sweet deal so that they can get movie premieres before theaters. But if theaters disappear, then the streamers gain a lot more leverage than they have right now. Next thing you know, Apple's Tim Cook is demanding more money from this deal. Hey, Universal, it's Tim.

I got a band of Genius Bar Apple retail employees with me. We want our money. Trolls 5, I'll do it for 2080. Next thing you know, that deals back to being 50-50, just like it was with theaters. This is Tim Cook. I'm here to renegotiate a deal. 50-50, and throwing two tickets to Universal for my kid. Business partnerships are a swinging pendulum of leverage.

Jack, can you whip up the takeaways for us over there? Spotify and Netflix. They're both streamers, but one is really chill about password share. Spotify's stock down 12% because it's one key metric. Looked fantastic. We're talking paid subscribers. For our second story, Boeing burned through $4.7 billion of cash last quarter. We should point that out. 4.7 billion. Cash is king and Boeing has 27 billion more. It could burn through before bankruptcy. Third and final story, AMC theaters is so furious that Universal cut out theaters with trolls too. It's so furious there with an angry letter. So AMC and other theaters are banning Universal in response.

Now, time for our snack fact of the day. This one's sent in from Charles, Daniels, from Bray, California. George Lucas, the creator of Star Wars and the former CEO of Lucasfilm, filmed part of episode six in his home county, Marin County, California. Now, the John Muir Woods are right nearby, and it's home to those indigenous, adorable Ewox that still roam around to this day. George Lucas also owns Skywalker Ranch, which is his movie ranch and workplace. And yet, Marin County has no Walmarts and no Carl's juniors. Snackers, in addition to our snacks break on

Friday, Jack and I have the opportunity to hang out and chat with Mrs. Dow Jones today at 4 p.m. Eastern. She's pretty much the queen of finance. We'll be talking personal finance, our market snacks founder story, how we joined Robin Hood and a lot of other great stuff. Great stuff. Check out Mrs. Dow Jones' Instagram for how to watch. Last thing before we go, happy belated birthday to Sri Jamia from Brampton, Ontario. She is the unofficial ambassador of the Canadian Snacks Delegation. And according to people familiar with the matter, she has convinced half the city of Brampton to add Robin and snacks to their daily routine. You don't mess with PFWTM even if it's unconfirmed. All four of your college roommates, Shri Jamia, consider you the best one yet. And we love all you snackers too.

We'll see you tomorrow. I own stock of Spotify, Amazon, and Carnival Cruises. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc, or any of its subsidiaries or affiliates. The podcast is for informational purposes only and is not intended to serve as a recommendation to buy or sell any security and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.