The Best One Yet - Microsoft’s triple-threat quarter, Skechers’ 12% surge, and iHeartMedia’s back on Wall Street

Episode Date: July 19, 2019

Microsoft remains the world’s biggest publicly-traded company, so we jumped into the big question no one understands these days: How it makes money. Skechers stock popped because it’s basically become an international company, but its core focus is (ironically) avoiding trends. And iHeartRadio just started trading again on Nasdaq after emerging from a hefty bankruptcy.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. This is Snacks Daily. It is Friday, July 19th. This is the best one yet. This one's a lot more exciting than yesterday. Markets inched up a tad, but I'm excited to tell you about our three stories. I'm thrilled about this mix. First off is Iheart Radio. Yes.

Throwback radio company upgraded itself. From the table reserved for bankrupt companies. Not a fun table. To the NASDAQ stock exchange. You want to be on that table. We're looking at the numbers and its favorite word companionship. It's a beautiful thing. Second story, Microsoft announced some great.

earnings. It's actually the number one most valuable publicly traded company in the world. We're going to tell you the most fundamental and confusing thing about Microsoft. What Microsoft actually does? Ask anyone next to you, you're going to get six different responses. We're going to give you the one response that matters. Third and final story. Skechers stock surge 12% because it turns out is the coolest thing outside the U.S. that there is. It's really not even a U.S. company at this point anymore. Although it's based in Manhattan, Beach. Snackers, yesterday we talked about the car sharing economy. We talked about the ride sharing economy. And we asked Snackers on Twitter to share the share. Everyone knows about the home sharing economy. What is the next thing

to join the sharing economy? What is even shareable? We got great answers. We got amazing swap mill on Twitter told us, what about parking spot share? Classic. And then Pedro Mueller got a little creative here. He thinks about a backyard chair. You're not using that thing. If you got a trampoline or a grill or a croquet set, share it. Let someone else's family use it. Get a couple bucks out of this thing. J.D. thinks puppy share is a good idea. In fact, he's right. There's already an app for puppy share. It's called Bark and Barra. I thought puppy share was going to proceed ride share. Now, Chase McElroy completely agreed with me because I thought that Snowgear exchange should be a sharing company. This was just a validator from Chase. In 2004, Chase bought

Snowgear. It's been sitting in a box in his closet 99.99% of the time since. Chase, you should have launched the company and started sharing this stuff already. Let's crank out a couple more. Ben's Street thinks a friend share app, which is nice. Ben's a really thoughtful human being. When you don't have time to make any friends, just rent them. It would be great. You got the whole weekend. What are you doing on a Friday? Last but not least, musical instrument share is the proposal by dot. We weren't totally sure of here. Yeah, because I think they're like a little more intimate. Yeah, I had a clarinet in fifth grade. My mouth was all over that saxophone. Art something sacred? I need the read. B.Y.O. Reed. That's the only way it's going to work. If anybody's like an app

developer, get to work. And if anyone has any other idea, send us your hashtag share the share. In the meantime, listen to these key stories. And then we'll hit our stories. You're tuned in the snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about the hearing food is air candy. They don't reflect the views of the Robin Hood family. It's all informational just so. You know, we're not recommending any securities.

It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you. Robahood Financial, LLC, member FINRA slash SIPC. For our first story, IHeart Media, the radio icon, just started trading on NASDAQ again after popping itself out of bankruptcy here, like a butterfly metamorphosizing. Well, this is the biggest radio company in the United States. It's pretty big. And it filed for bankruptcy last year with a hefty, you know, $20 billion in debt.

Yeah, basically, it had this super complex financial deal right before the financial crisis. Don't even get into it. It has haunted it for 10 years. Life is all about time. But a new chapter. And so the company told us that it's new, business, it's emerging, breaks down into two nice, clean categories. So sweet. Music and radio. Now, they don't just want to just, you know, start trading publicly again. They're coming after Spotify kind of aggressively. Yeah, they did it in a very similar way, actually. They came public through what's similar to a direct listing. But it's not an IPO. No, but shares slipped by 4% on their first day. So we're going to compare IHeart Radio to Spotify because of their business models and the way they went public are similar.

Everyone would do the same thing. Ed Shear and versus Taylor Swift. You got to do it. Let's start with the total number of listeners. I heart radio's biggest brag number is that 275 million Americans listen to Iheart Radio. Fairly comparable to Spotify, which has 217 million users worldwide. 64 million North America. Now, I Heart Radio claims that it reaches more users than any other media, including Google. Which is extremely bold. That is a wildly bold claim.

I'm wondering if Google even heard about this what they would be doing right now. Do you know how they claim that? They claim that includes any user above the age of six. Jack and I saw this and we were a little turned on. Six years old is really young. You don't have any control of your life at six years old. They're sitting in the backseat. Technically, they hear the radio.

You're told what to listen to. They're quote unquote users. Let's be honest. All right. So the second big area? Podcast. This was big. Spotify acquired three podcasts earlier this year.

Right. They want to spend like 500 million on podcasts. But guess what? IHeart Radio is actually the number two podcast publisher in the United States behind only NPR. It's got like 19 million potters, right? And it has two key shows. Stuff you should know in the Ron Burgundy podcast, among others. Now, in other areas, IHeart Radio doesn't have as sharp and polished to look.

No, it looks pretty bad. Actually, in 2017, it paid $2 billion just in debt interest payments. That's it. That's because it had so much debt. It had so much debt that a judge actually came in during the bankruptcy and eliminated like $10 billion of debt. And it still has debt. I know. And if it hadn't eliminated all that debt, IHeart Radio couldn't have survived.

It was paying one third of its revenues in just debt interest payments. That's not sustainable. All right. So that's on the debt side. Now let's look at the revenues here because interestingly, it had similar revenues to Spotify. Yep. IHurt Radio had $6 billion. So did Spotify a little less than that.

But Spotify is growing so much faster than IHard Radio. IHart Radio is growing at like 3%. Spotify's cranking at 30%. So I love this takeaway. Jack, what is the takeaway for our buddies tuned in at IHard Radio? Companionship is the fuel for radio. Jack is doing the air quotes on this thing wildly because IHeart Radio dropped that word, companionship in its filing paperwork, the S1, 21 times.

IHeart Radio is banking big on that radio segment, the second segment, and that is completely based off companionship. Right. It knows that when you're listening to shows, you're listening to hosts, you're listening to people talking, you build up a relationship with them. That's why we love doing this at Snacks Daily. We're friends with everyone here. It wants your daily habit.

It wants your morning routine. We love that we have that at Snacks Daily, and that's what IHart Radio is banking. And it knows that listeners who are listening to podcasts and build those relationships with the host, they tend to be better, longer listeners than anyone just listening to music. For our second story, we jumped into look at Microsoft because it just announced earnings. Apparently it's a perfectly balanced profit triangle. And it's setting record everything. This thing, we've got to take a little trip here to a beautiful Redmond Washington. Microsoft is based right across the HABA from Amazon, which is in Seattle.

They don't have Boston. It's like the same thing as Amazon, other side of the bay, but it's a lot nicer. I heard they have better food. Yes. Better perks. Someone confirmed this. Now, revenue rose 12% to almost $33 billion. And profits jumped nearly 50% to $13 billion, which is a nice and clean record.

Now, that $13 billion quarterly profit, besides Apple, which is like pretty darn good at profits. Maybe you heard of it. That's like the best quarter of any profit, profitability-wise, ever. Now, Microsoft is on top of its game. There's only one problem. No one really understands exactly how it's making its money. We're going to use this opportunity to explain what does Microsoft actually do. Turn to three people next to you.

You're going to get three different answers, and there's a reason why. We jumped into the earnings report, Snacks style, and we looked at the three key operating segments, and we're going to look a little bit more right now. First operating segment you got to know about. This is, and again, these aren't named to be fun because you know Microsoft. They're named to be like confusing and required more exclamation. It's actually a offensive sounding almost. productivity and business processing. That's the division.

We're talking old school Microsoft. Microsoft Office, Word, Excel, PowerPoint. But interesting, this is the area that also has LinkedIn, which Microsoft bought three years ago. And they make money off job posts and ads, I believe. Yeah, every time you get that message saying, hey, it's Ray, I want to connect. And then they tell you that they've got the best business operating software you've ever seen. LinkedIn premium, so you can see who's stocking you're paying money. That's going to LinkedIn.

That's going to Microsoft. Also, Outlook and the new Slack competitor team. So inter-office messaging. So that's what Microsoft's making for part of its revenues. Productivity and business processing. Second big segment is the intelligent cloud. I mean, it just sounds sex. This is a big deal.

You know, revenues are growing there. It's what everyone likes to talk about. The cloud, the cloud, the cloud. We're talking about computer servers. Basically. Companies that have apps or companies that do anything technological. They need that stuff stored somewhere. Well, they need processing power.

They need processed. And instead of buying a bunch of physical things to put in the basement, it's in the cloud. They rent out Microsoft servers, which are somewhere else. Honestly, if you don't know what a company does these days, you can probably throw a target at the word cloud and it's going to work most of the third and final segment is personal computer. Oh, this is a throwback. Well, it's hardware.

It's easy to understand. It's classic. It's computers. You're physically touching it. It's tablets. It's touching you. It's also the Xbox. Oh, man.

These are classics. Now, here's the interesting thing. We had no idea about this. It is a perfectly balanced triangle. It looks like a Mercedes logo if you had to divide this into a pretty little pie chart. This is begging to be pie charted. All those three divisions we just told you about, a third, a third, a third of the revenues. 33, 33, and then one perfectly balanced, repeated.

So, Jack, what's the takeaway for our buddies over at Microsoft who have the Feng Shui going on? Microsoft owned Chapter 1 and Chapter 3 of computers, but it completely missed Chapter 2. Chapter 1 opening up the book. That's personal computers. Bill Gates and Paul Allen founded Microsoft up in Seattle, and they owned operating systems. systems, they owned Microsoft Office, it was a monopoly. That was Chapter 1. Chapter 2 is mobile.

Bill Gates confessed last month in an interview. It was a big move by him. He said the biggest mistake he made at Microsoft was completely missing mobile. We're talking the last 15 years of Android and Apple operating systems, iPhones. It should have been Microsoft is what Bill Gates said. And it wasn't a part of it. And then the third and final chapter is the cloud. Under the new CEO, Satcha Nadella, since 2014, Microsoft has climbed back to the top.

It's still behind AWS in the cloud, but it's doing really well. And that's why it's the number one most valuable company on planet Earth. Worth over a trillion dollars, a platinum platypus. For our third and final story, we're going a little basic here. Skechers stock searched 12% after its earnings report. We were highly curious about this. We have to mention the elephant in the room. You know we're talking about.

The shape-up debacle. Like 2014 or 15. Skechers came out with these shoes called shape-ups. They look like inverted umbrellas on your feet. They've got like a rounded sole. They're really up. You don't walk down the street, you roll down the street. They were marketed as like something that will make your calves and your physique look a little

better when you wear them. A few years ago, it turned out they do like the opposite. They may actually hurt you and they had to pay out like money to 500,000 humans. They had to refund 500,000 people who bought shapeups. But Skechers is back, baby. That's the past. So, for comparison and context here, the company's worth $5.5 billion, which is about a third of a lift.

If I don't hear it in lifts, I don't understand the size. Now, sales jumped 11% last quarter. But the big shocker, a 20% sales surge international. International is huge. This is like your friend who studied abroad in Argentina and just never came back. You're like talking about, hey, Dana, how you doing? And they only respond, no, no, no, no. The company has 60% of its sales abroad now.

And it has specific international strategies. For example, in Asia, a new anime, like branded shoe is doing really well. It's exclusive to Asia. So you can actually only get this at the stores in Asia. Now, abroad, the strategy is pretty simple. Right. They're like building out physical stores. Just open up a store. Right. Because people don't know about the baggage that Skechers has.

We're talking about the lame brand baggage. Did we mention the shoes are shaped like inverted? That's what it has to fight with in the United States. Now, interestingly, in the United States, things are inverted because it only gets a fraction of its sales here now. And it has a little bit of a different marketing strategy. Well, it's not using celebrities like Nike and Adidas. It's not getting the A-list. It couldn't even get Brittany from five years ago. It's getting like sub-celebs who are kind of relatable just like you had made.

It's almost like this has become their side-side hustle for the celebrity. Tony Romo is the leading actor in a leading role here. Now, we jumped in snacks out and look at the earnings report. They've got a picture of Tony Romo, who's like their main promoter right now. He's wearing like leisure clothes at home. Like clubby clothes. He's got a dye coke in his hand with a lemon in it. It's just a nice letter Saturday and he's wearing Tony Romeroom.

He's kind of staring at you from the earnings report saying, yeah, I did this. A couple other celebs here, Joe Monty. Montana who won a Hizman like 30 years ago. You got David Ortiz has decided to jump in and, you know, wear the Skechers shoes to promote. And then they're also coming out with golf shoes that look pretty cool. I won't lie, I checked out the commercial. They're using like Brooke Henderson and Russell Knox.

A female and a male golfer. Full disclosure, we didn't really know about these guys. I'd never heard of either. We hadn't heard them at all. It's kind of the B-list thing we're talking about. So, Jack, what's the takeaway for our buddies who are strutting away over at Skechers? Skechers is steering clear of trends. They're not only steering clear.

They are actively anti-e avoiding trends. Get this quote from the CFO. Our core demographic isn't the teenage fashionist. The core demographic is the guy who just wants a beef burger, damn it. I don't want these plant-based alternatives. People who are like stressed about trends. Skinny jeans were in. Now apparently mom jeans are in.

I'm getting so confused. Is it wide leg, thin leg, boyfriend cut? I have no idea. It's not about like the new trend that's trending on social media. No. Skechers is about the anti-trend. The stuff that you're not trying to Instagram. It's dependable.

They've got 3,000 different. styles of shoes out there because they're casting a winette. They don't care about the track. The key with Skechers is like, do what's comfortable for you. It's following the same strategy as Crocs, both of which are doing pretty well. Jack, can you whip up the takeaways for us for the weekend? IHeart Media is back on the NASDAQ stock exchange, and it's banking on music and radio. It's banking on one word here, companionship. Second story, Microsoft's perfect triangle of profitability sounds like a business school textbook chapter. Jack, chapter three, both them are owned by Microsoft.

Skechers is doing its thing, focused on comfort, and regular guys and gas. The stocks up 50% this year because trends, who needs trends? There's so much pressure with trends. Get away from trends. Get away from the trends.

Now, time for a snack back of the day. This one tweeted in by Melanie in Union City, California. Again, right down the street from us, kind of. Other side of the bad, right. She noticed we mentioned Apple's Siri the other day,

so she did like a little bit of a snack style deep dive into this. Apple did not create Siri. Nope, common misconception. Like we mentioned in the pot. Not exactly the case. It was developed. by a DARPA funded project by a company called SRI International.

DARPA is like a military thing to develop. This is defense focused. Yeah. If you hear a D, it's defense. And the project's name was Calo, which is an acronym. An acronym. And it means soldiers servant in Latin. Right.

That's like a whole book textbook right there. This is depth. Now, eventually Apple acquired Siri though in like 2010. Beautiful thing. Now, a couple other key stories you got to know about in the Snacks newsletter. Boeing has set aside a cool $5 billion. to repay its customers, which are airlines, for the 737 no-fly situation that's been going on since March. True. And you got Chewy's IPO results. Now, Snackers.

Odds are you're going to, I don't know, see another person this weekend. Hopefully it's a friend. You may even rent a friend like someone suggested to us, which is still a totally viable option. Now, if you do, and that friend might be interested in snacks or rent-a-friend. If you let them know, if every snacker lets one snacker know. I'm doing the math right now. We will double in size. It's a kind of a fun thing.

That'd be a great-ver. awesome thing. We're down with that. No matter what, though, your faithful snack host will be back on. We're right with you. Can't wait. Have a great weekend. Great one. 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, 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.