The Transcript 08.10.20

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Succinct Summary: Many companies and individuals have been hard hit by the pandemic and are having a tough time. All eyes are on another stimulus package to try to cushion them. Worryingly, cases are rising worldwide even in areas that were thought to have contained the virus. The picture from July and early August is one of a mixed and uneven recovery.

Macro Outlook:

Most companies and individuals are having a tough time

“This has been extremely hard on the people we serve, our sellers, their employees and all the individuals who use Cash App. Folks right now are struggling to keep their businesses open, pay their employees, pay rent and even buy food for their families” – Square (SQ) CEO Jack Dorsey

“Given the impact of COVID-19, our second quarter was tough, we had an 82% fall on reported profit before tax and a 57% drop in adjusted profit before tax…So in summary, a difficult quarter overall…But overall, many parts of the business were hit by very high ECLs and significant revenue pressures.” – HSBC (HSBC) CEO Noel Quin

“The June survey results…show that survey respondents have persistent, elevated concerns about job security in the face of record unemployment” – Federal National Mortgage Association (FNMA) CEO Hugh Frater

“In the last 5 months, our company and the cruise industry at large has experienced more adversity than at any other time in our 50-plus-year history. The negative effect the cruise industry faces from the COVID crisis eclipses that of 9/11, the Great Recession, and any other stress test scenario that once imagination has ever modeled combined. Looking back, it would have been unimaginable for us to foresee that today, 5 months after the initial suspension of service, which was declared on March 13, that our entire 28-ship fleet would still be at a complete standstill.” – Norwegian Cruise Line Holdings (NCLH) CEO Frank Del Rio

The hope is for another stimulus package

“quickly pulling away the support that consumers and businesses are receiving would be a pretty traumatic move for what’s happening in the economy. Four months ago, when we did the first stimulus, we thought the economy faced a pothole and the stimulus put a plate over it so we could navigate. Now escalation of the virus may be making that pothole into a sinkhole and creating a need for a longer plate” – Richmond Fed President Thomas Barkin

“If we continue down this path with no significant stimulus…we estimate that between 35-45% of 30 million small businesses in America will begin to permanently close by Labor day. It is no longer a crisis. This is a five-alarm emergency” – Starbucks (SBUX) Former CEO Howard Schultz

The picture of demand trends in July and early August is mixed and uneven

“I would say one encouraging highlight from July certainly from my standpoint is even though you saw a few outbreaks and a little bit of retrenchment in some markets and some new restrictions being put back in place, I think trends continue to stay – to be stable throughout the month, and obviously even slightly improving over what we saw in June as well. So I think that’s encouraging, as markets continue to open” – Global Payments (GPN) COO Cameron Bready

“Strong demand has continued into July, resulting in an increase of over 60% in net orders year-over-year.” – LGI Homes (LGIH) CEO Eric Lipar

“We recorded gradual recovery trends towards the end of the second quarter” – Henkel (HENKY) CEO Carsten Knobel

“We saw consumer demand begins to plateau in July as the recent resurgence of COVID-19 cases led many states to pause or reverse that based reopening measures” – Yelp (YELP) CEO Jeremy Stoppelman

“…the rate of growth and demand moderated in the middle of July following the July 4th holiday due to the impact of rising case counts in certain areas and many cross-border travel restrictions that remain in place across the world. We have seen increased momentum in the latter half of July” – Hyatt Hotels (H) CEO Mark Hoplamazian

“..So we saw an increase in the beginning of July, and a lot of that was related to the holiday in the U.S. And then the growth rate started to moderate. But now we’ve seen some improving week-on-week demand into the latter half of July. And in fact, we of course, look at daily information, and we saw that over the weekend. We saw a nice uptick in August and the first weekend in August as well. So it’s been uneven, and we’re tracking it very closely, but we do see continued progression” – Hyatt Hotels (H) Joan Bottarini

“The positive momentum during the month of June continued through July, and we see a stronger third quarter compared with the second quarter, while we are mindful of local hotspots that may impact our customers due to the COVID-19 virus” – GCP Applied Technologies (GCP) CEO Randy Dearth

“we are beginning to see signs of improvement as July occupancy finished nearly 1,000 basis points higher than in June in our urban portfolio, the largest single month over month gains since the onset of the crisis..we have seen kind of the rate of growth to the rate of improvement is slow as we got into July. I think there’s a few things going on there.Clearly some of that is driven by a resurgence in cases, particularly in Summit markets of the virus.” – Summit Hotel Properties (INN) CEO Dan Hansen

“Across all our geographies, where we have GDP sensitive revenues, we have seen strong recoveries in volumes once restrictions were lifted, while we are pleased with the faster than expected recovery of many economies around the world that we do business in and number of our operations continue to operate at levels that are off pre-shutdown levels.” – Brookfield Infrastructure Partners (BIP) CEO Sam Pollock

“the third quarter got underway, the consumer sentiment began to shift with the uptick of COVID-19 cases across the country, we are seeing a pent-up demand taper off and joints start to stabilize as clubs have been opened longer. For July, joints have been generally flat to prior year, except when we were up against the July sale period. At the same time, we also saw an uptick in cancels, with much of the increase concentrated in states that experienced a resurgence of COVID-19.” – Planet Fitness (PLNT) CEO Chris Rondeau

Are we placing too much emphasis on waiting for the vaccine?

“If you put too much emphasis on the idea that a vaccine is going to come and save us, and someone’s going to crack a very difficult scientific problem … then you get people not doing anything and sitting around waiting for the vaccine. “So if you do that, you do risk a depression because you could get a lot of business failures while you’re waiting, potentially a very long time for a vaccine to come and save the day.” – St. Louis Fed President James Bullard

“China serves as a great example that travel recovery is possible even without pharmaceutical treatments or a vaccine as long as proper, well-coordinated actions are taken to significantly reduce the spread of the virus.” – Hyatt Hotels (H) CEO Mark Hoplamazian

Worryingly, cases are rising again worldwide
“In many parts of the world that already experienced the first wave of infections, we see numbers rising again….In many key regions, public lockdowns continue or are further tightened. In other regions, they are being reintroduced to counter a second wave of infections.” – Henkel (HENKY) CEO Carsten Knobel

“While portions of the economy have reopened, regional outbreaks may become the new norm, and the extent to which consumers, workers and businesses retrench in the coming months is uncertain” – Federal National Mortgage Association (FNMA) CEO Hugh Frater

International:

Several companies are opening their global stores with a positive trend

“if you look at the rest of the world, Europe continues to reopen and we’re seeing the benefits of that as we work through July. Asia is a little bit of a story of you know, mixed signals coming out of different markets or some markets remain closed or maybe are re-closing, while others are starting to reopen. But the overall trend, I’d say in Asia remains fairly positive, as it relates to volume recoveries as well” – Global Payments (GPN) Cameron Bready

“In our international markets, approximately 90% of our restaurants are now open versus half during the peak of the lockdowns, and we’ve seen sales ramp-up at a healthy pace….As of the end of July, over 90% of our restaurants are now open on a global basis, including substantially all of our restaurants in APAC, approximately 90% of our restaurants in EMEA and approximately 80% of our restaurants in Latin America.” – Restaurant Brands International (QSR) CEO José Cil

Hotel businesses in China have made an excellent recovery

“With respect to China, the progression has been really great to see very encouraging. We’ve seen a steady progression of occupancies in the market over the course of the last several months. And to the point where if you look at the different regions within China and the performance there, we’ve seen very strong performance in East China, South China and West China to the point where by the end of July, they were at occupancy levels equivalent to where we were in 2019, which is quite remarkable” – Hyatt Hotels Corporation (H) CEO Mark Hoplamazian

The huge untapped online potential in Africa

“Nine in 10 businesses in sub-Saharan Africa fall into the SME category, so they are incredibly important in driving growth for African economies and providing livelihoods for millions of people. Their success means sustainable prosperity for Africa’s entrepreneurs and going digital is a crucial part of this process. In Africa, online sales currently represent only 1% of total retail sales, so there are opportunities for Africa’s small businesses as they go digital” – Mastercard (MA) Middle East & Africa President Raghu Malhotra

Financials:

Loan repayments and issuance are recovering well

“While there is still a lot of uncertainty, we have seen some early signs of recovery. Our borrowers have demonstrated resiliency and we expect to deliver positive investor returns. Monthly loan volumes have more than doubled from the recent bottom in the second quarter and five out of our Top 10 investors have resumed purchasing.” – LendingClub Corporation (LC) CEO Scott Sanborn

Companies and governments will be heavily indebted in this downturn

“It is our belief that one of the biggest economic costs of the downturn will be that many industrial companies and all governments will be significantly more indebted. Once the immediate measures to stabilize economies and businesses have been implemented, governments and businesses alike will need to evaluate alternative source of capital to repay excessively high debt levels.” – Brookfield Infrastructure Partners (BIP) CEO Sam Pollock

Midmarket loan markets price terms have shifted in favor of lenders

“Given the economic backdrop middle market loan volumes during the period were light in both the syndicated market and the private credit market. Activity in the middle market remains slow as sponsor and lenders – as sponsors and lenders continue to struggle to evaluate how to price risk.While deal activity has been light, we do see that price in terms have shifted in favor of lenders. In addition, borrowers are increasingly seeking asset-backed lending solutions, an area where we the mid-cap have expertise in significant market share” – Apollo Investment Corporation (AINV) CEO Howard Widra

Consumer:

Consumer habits are up for grabs in this current environment

“We are all creatures of habit and shopping is largely habit driven. There are very few times in one’s life when you have an opportunity to reshape their habits. You know the classic three are when you get married, when you move home, and when you have a baby, and otherwise your habits are pretty cemented and you’re not really open to forming new habits. And so what this current moment has created is, it’s created a moment when everyone’s habits are up for grabs. Suddenly before you go buy anything, you’ve got to stop and think for yourself, where can I go to get that” – Etsy (ETSY) CEO Josh Silverman

For instance, dating habits are changing

“People are certainly adapting their dating behaviors to the pandemic and lockdowns, and based on the stories we’re hearing, some of the more popular dates these days are “walks in the park”, “picnics” and “backyard barbecue”. We’ve continued to hear more and more stories about super interesting video dates and even video and live-streamed wedding which might become a trend…or people who have tried online dating, they definitely found value and are using it more” – Match Group (MTCH) CEO Shar Dubey

Ad spend is bouncing back slowly with a data-driven focus

“Since ad spend troughed in mid-April, advertisers have been returning and reactivating campaigns, but most of them with new approaches and new creatives given the environment we’re in. They realize that as markets reopen, they have a unique opportunity to gain market share. Many paused in mid-to-late March and even early April, but some advertisers in all categories have seen this as an opportunity to gain share. To do that, they’ve had to be more flexible and agile than ever, as markets open in different ways, at different rates, even within the same country. They are under pressure from their CFOs to prove the value of every advertising dollar, forcing them to prioritize advertising that is measurable and comparable. And they are dealing with a consumer base that is rapidly shifting away from traditional, linear TV. All of this puts data-driven advertising in the front seat.” – The Trade Desk (TTD) CEO Jeff Green

“in late May, as local economies began to reopen and consumers and local businesses were adapting to the new normal. We saw both traffic and CPC advertising budgets begin to recover.In June, we continue to see steady improvement in ad budgets and retention, benefiting from a strong rate of return from customers who had received relief in April and May.” – Yelp (YELP) CFO David Schwarzbach

A shift towards leisurely wear

“We see an even more pronounced fashion shift towards leisure. The increase in workplace flexibility is here to stay. And the majority of companies plan more and more permanent remote working. And of course, when you sit at home, you don’t wear your suit, you don’t wear you tie, but you tend to wear sneakers from adidas or hoodies” – Adidas (ADDYY) CEO Kasper Rorsted

People really want to get out

“If the pandemic has taught us anything, it’s that people will do anything to get out of their house or their apartment. If you told me right now I could go spend three hours at a hardware store, I would tell you that’s an exciting afternoon” – AMC Entertainment Holdings (AMC) CEO Adam Aron

Record masks sales in Q2 at Etsy

“In the second quarter, Etsy sold $346 million worth of masks and over 110,000 sellers sold at least one mask. These are really big numbers. It’s hard to wrap your head around them, but to give you some sense of scale, that’s enough masks to stretch all the way from New York to London” – Etsy (ETSY) CEO Josh Silverman

Uber Eats is now the size of the entire Uber in 2017 as food deliver moves from a luxury to a utility

“At a roughly $30 billion annual gross bookings run rate at the end of Q2, our delivery business alone is now as big as our Rides business was when I joined the company in 2017. We’ve essentially built a second Uber in under three years, with an accelerating growth profile, a global footprint and an enormous TAM. And while some of the recent surge in delivery due to COVID, I believe we’re witnessing a much more profound shift in consumer behavior that will last well beyond the pandemic….This is an opportunity that will be many times larger than even we expected…The COVID crisis has moved food delivery from a luxury to utility. And as we add more use cases, our service will move from a utility to daily need” – Uber Technologies (UBER) CEO Dara Khosrowshah

Technology:

TV landscape has drastically changed as COVID-19 accelerates:

  • Connected TV (CTV) adoption rates

“In Q2, despite the impact from COVID, CTV spend grew about 40% year over year. In Q3, we anticipate that the CTV spend growth rate will more than double Q2. We believe the COVID pandemic has permanently accelerated the growth of connected television, changing the TV landscape forever. CTV has changed the landscape forever. The effects of C-19 have changed them forever. There might be some noise as things get back to normal. But as they get back to normal, people are moving, where they want to go, which is on-demand.” – The Trade Desk (TTD) CEO Jeff Green

“Streaming is the most powerful force shaping television today. It is unleashing innovation and bringing greater choice, value and control to consumers. We are also seeing that the ongoing COVID-19 pandemic is accelerating the macro trends that will define the streaming decade” – Roku (ROKU) CEO Anthony Wood

“On a streaming hours per active account per day basis, they spiked dramatically during the initial lockdown phase and have since moderate – the year-over-year growth of that metric has been moderated a bit, but it is still above pre-COVID levels” – Roku (ROKU) CFO Steve Louden

  • Cord-cutting

“Our research suggested that 11% of U.S. households would cut the cable TV cord by the end of the year. That’s about triple the rate of cord cutting that we’ve come to expect the last few years. That cord cutting rate rises to 18% for the coveted 18-34 year-old demo… ROKU recently issued its annual survey into TV viewing trends. According to their research, 32% of U.S. households have now cut the cord or never had it, and a further 25% are “shaving” their cable TV costs. 45% of those cord shavers said they expect to fully cut the cord by year end. The number one reason? Cost savings” – The Trade Desk (TTD) CEO Jeff Green

“Tipping points are always easiest to observe and retrospect. But our view is that the tipping point is here and that COVID ultimately has pulled forward a bunch of cord cutting that was going to happen anyway. I mean, linear television was already experiencing double digit ratings declines year-over-year. We see that in most TV networks, their ad sales are down significantly. The spending was already significantly disproportionate to the audiences that have already left linear television. And so, our view is that the tipping point here, it’s driven by cord cutting. And the pandemic has really forced marketers to come to grips with something that was coming anyway, which is that there’s been a significant departure of audience out of linear television and it’s not coming back” – Roku (ROKU) CEO Anthony Wood

Students more open to online learning or a hybrid model

“Our research shows that the majority of students now feel online learning to be as legitimate, effective and rigorous as in-person instruction. In fact, half of the students surveyed who had no prior online learning experience now want the option of hybrid or fully online education and 72% of students who had already had online experience expect the same” – Chegg (CHGG) CEO Dan Rosensweig

Rapid growth in digitization and e-commerce continues

“We also found the company’s digital communication strategies were accelerated by an average of six years, barriers like lack of clear strategy or getting executive approval or reluctance to replace legacy software and lack of time have broken down and budgets are increasing as companies are seeing new ways of engaging customers” – Twilio (TWLO) CEO Jeff Lawson

“The lockdown has led to a step-change in digital penetration. Consumers are shifting to online faster than before. And in the first half, more than 1/3 of our sales, own e-com and partners were digital, a fast forwarding of the digital transformation that also will play into the long-term attractiveness of our industry.” – Adidas (ADDYY) CEO Kasper Rorsted

“During Q2, digital sales in our home markets grew more than 120% year-over-year and over 30% quarter-over-quarter. And this growth was broad-based across our three brands, which each saw a substantial increase in digital sales in the quarter” – Restaurant Brands International (QSR) CEO José Cil

“the online shopping or e-commerce as a percentage of total retail doubled in April compared to Q1 of this year. This trend continued in May and we have no reason to believe that it is slowing down. Our customers are handling more B2C packages than Xmas or Black Friday. It is worth pointing out that the growth in e-commerce was not restricted to traditional larger retailers only. We saw thousands of small and medium-sized merchants shift their sales to online channels. We expect this trend to continue.” – Cargojet (CGJTF) CEO Ajay Virmani

This secular change is here to stay

“…I don’t think the habit that now people have formed to get their daily supplies on e-commerce are going to change. So let’s say, for example, if the retail were — 7% of the total retails were e-commerce and it went to 15% during pandemic. We can see that maybe it’ll come back to maybe 12% or 11% or – they’re not going to certainly go back to 7%. So there will be some cannibalization from B2C to B2B, because people are itching to go out shopping. But I think certain trends will remain strong” – Cargojet (CGJTF) CEO Ajay Virmani

“what happened I think during the end of Q1 and Q2 with this huge shift of people moving online, and obviously I mentioned this, we strongly believe and we’re actually already seeing evidence to it in different countries, that this is not a one-time shift. It’s a new baseline. So in our mind, what we see now is something that wouldn’t happen over many years that just happened overnight.” – Wix.com (WIX) CEO Avishai Abrahami

Early adaptors of the cloud benefitted a lot in the pandemic

“We made a commitment in 2018 to migrate to the cloud, and that took a significant investment of both money and time. But thankfully the engineering team completed that migration on schedule in the first quarter of 2020, which allowed Etsy to realize the full opportunity of the second quarter of 2020. Without that investment Etsy would be in a very different position today…ad we not made that investment when traffic doubled on the site basically overnight. If we had been in our own data centers without the ability to add capacity, you know our site would have slowed to a crawl and this moment would have passed us by.” – Etsy (ETSY) CEO Josh Silverman

“Smaller customers and large enterprises that are earlier in their cloud journey continue to see stronger growth.” – Datadog (DDOG) CEO Olivier Pomel

Worries about the impact of Apple’s new IDFA privacy features surface

“terms of the actual specific impacts that IDFA will have on acquisition or advertising, CPMs and yield. I think it’s a little too early to tell what will happen there. I think there’s going to be puts and takes. And I think long term, things will settle out. There’ll be new opportunities and new places to innovate. At the same time some traditional tools and tactics might start to lose their effectiveness.So, it will be a little bit choppy here in the early stages.” – Zynga (ZNGA) CEO Frank Gibeau

“I do think long-term when people go to apps and find that they don’t work as well because in fact you do need to share your location with the Yelp in order for it to work at all. The long-term, everybody is going to become more familiar with the quid pro quo of the Internet and will have access to nearly the same amount of inventory that we have today. So, I don’t expect there to be any major disruption in the short-term or the long term” – The Trade Desk (TTD) CEO Jeff Green

Disney+ releasing Mulan straight to video is a key moment

“we’re looking at Mulan as a one-off in terms of, as opposed to say trying to say that there is some new business window we model that we’re looking at.So Mulan is a one-off. That said, we find it very interesting to be able to take a new offering, our premier access offering to consumers at that $29.99 price and learn from it and see what happens not only in terms of the uptake of the number of subscribers that we get on the platform, but the actual number of transactions on the Disney+ platform that we get on that PVOD offering.” – Walt Disney (DIS) CEO Bob Chapek

“Our biggest reaction to the Mulan announcement is how much it reaffirms our wise decisions last week (with the Universal PVOD deal) to take the risk and sign on to PVOD because right now Disney’s choice under the current world order are two choices: Take it to the home or they take it to theaters…Some of our competitors are anxious about this change. Change is difficult for some to cope with.” – AMC Entertainment Holdings (AMC) CEO Adam Aron

The high-end smartphone market is contracting

“the business environment surrounding us is deteriorating because of COVID-19, especially the high-end smartphone market is contracting and that is going – shifting towards mid- and low-end zones, that’s the volume zone now. I think that is a change that is taking place currently. And also, secondly, the friction between the U.S. and China, there is an impact from that” – Sony (SNE) Company Representative

Gaming is experiencing record-breaking growth

“With more people staying at home, we saw heightened levels of player engagement, social connection and monetization in our portfolio. Increased player engagement in our live services drove our exceptional Q2 results, including record revenue and bookings performances, and our best operating cash flow in more than eight years” – Zynga (ZNGA) CEO Frank Gibeau

“Nearly seven years after its initial release, sales of Grand Theft Auto V continue to exceed expectations. The title is now sold in nearly 135 million units and remains the standard-bearer of the current console generation. In addition, recurrent consumer spending on Grand Theft Auto Online outperformed our forecast growing 155% to a new record.” – Take-Two Interactive Software (TTWO) CEO Strauss Zelnick

Some companies are worried about the impact of the ban on Tiktok
“ByteDance, the operator of TikTok was our largest customer in the quarter. Any ban of the TikTok app by the US would create uncertainty around our ability to support this customer. While we believe we are in a position to backfill the majority of this traffic in case they are no longer able to operate in the US, the loss of this customer’s traffic would have an impact on our business.” – Fastly (FSLY) CEO Joshua Bixby

Industrials:

Demand for pools is extremely high

“I’ve been in this industry for 35 years and I’ve never seen anything like this…The shortage of materials in the industry is great – pumps, heaters, above-ground pools have been sold out for some time.” – Only Alpha Pool Products CEO Thomas Epple

Mall owners are turning away from department stores to stay afloat

“To replace department stores, mall owners considered schools, medical offices and senior living…With the current pandemic, industrial is the only thing left now.” – B+E CEO Camille Renshaw

“The situation for department stores is very dire. The outcome of the current economic climate will most likely be the disappearance or major restructuring of many national department store chains. Their precarious finances pre-crisis will make it nearly impossible for them to prosper post-crisis, without major restructuring” – EnVista SVP of Retail Gene Bornac,

Hotel booking windows have substantially shortened

“The booking window has shortened substantially. In the U.S. for example over 65% of our full-service bookings and over 75% of our select service bookings are being made only four days ahead of the date of stay. This is the shortest transient booking window we have seen. With respect to group business in North America we continue to experience near-term group cancellations and expect this to continue over the remainder of this year” – Hyatt Hotels (H) CEO Mark Hoplamazian

Cruise sailings suspension extended to the end of October, but people are still booking

“There is not a lot of positive news flow. And going forward, cruise lines now – have now suspended sailings through October 31, and in some cases through the end of the year. But people are booking. People are confident that we’re going to come back. People do want to cruise. They miss it. It’s a heck of a vacation experience, a heck of a vacation value. And so this is temporary. The question is how temporary is temporary” – Norwegian Cruise Line Holdings (NCLH) CEO Frank Del Rio

While funding for projects is available, people are cautious to invest in projects

“There’s funding for the projects. There’s still a lot of money around. That’s not the issue. People just are a little bit more apprehensive to start a project, especially a big one right now with the social distancing, specific hotspots, even on the supply chain side.” – GCP Applied Technologies (GCP) CEO Randy Dearth

Materials & Energy:

Increased demand for precious metals

“…there seems to be a real interest in precious metals these days. And so, we’ve seen real increased volumes Alex in gold and in silver in particular. We’ve seen for the first time some volatility in natural gas and increase the natural gas prices again, and maybe its weather related or supply related.” – Virtu Financial (VIRT) CEO Douglas Cifu

Healthcare:

Non-critical surgeries have increased this year even with COVID-19

“In June, we performed 2.6 times as many joint replacements in our ambulatory surgery centers as we did during June of 2019. For the year, even with the disruption of COVID, joint replacements in our ambulatory surgery centers have increased by 70%” – Surgery Partners (SGRY) CEO Eric Evans

But many patients are delaying coming to the hospitals

“Unfortunately, as oncologists with practices in the community setting, have noticed that patients are coming in at more advanced stages due to delays in addressing symptoms as a result of a pandemic.” – Guardant Health (GH) CEO Helmy Eltoukhy

There is a positive shift in attitude towards telemedicine even in oncology
“We saw a rapid shift towards telemedicine. Before the pandemic, oncology visits very rarely used telemedicine, with just a few percent of visits performed virtually. Over the past few months, this trend has reversed itself to protect advanced cancer patients, an extremely high-risk population, from exposure to COVID-1” – Guardant Health (GH) CEO Helmy Eltoukhy

More funding flowing into genomics related covid research areas

“what we are hearing from our customers in the research community is that there is additional funding coming into the mix as a result of the pandemic. And so what they are seeing is money being allocated to genomics research associated with the pandemic whether it’s to do with the host response for example or understand why some people are impacted more severely by the disease or a whole host of other things that’s driving more dollars into the research market, that is. And so they are thinking about how to plan those projects right now..We are seeing though more money come into genomics related COVID research not less and that’s coming from some of the usual sources” – Illumina (ILMN) CEO Francis deSouza

Real Estate:

The demand for homes is phenomenal

“what we’ve been hearing and same thing you’ve been reading on other builders’ transcripts and what they’re talking about the earnings calls, I think the demand is strong for all of us new home builders, and we’re all seeing increased demand and sales are going extremely well. So, I think we’re all raising prices. I know LGI has really focused on raising prices because of the demand, and also to offset the increases that we’re seeing in our costs, especially around lumber” – LGI Homes (LGIH) CEO Eric Lipar

“The demand is phenomenal. If you look at the delta and demand that I talked about in the prepared remarks regarding June; it continued to accelerate into July. Our applications per rent-ready property in July were up 50% year-over-year and 30% sequentially. So we’re seeing just phenomenal demand and we’re going to capitalize on that by maintaining high occupancy, and pushing rate where generally we might back off going into the end of the third quarter” – American Homes 4 Rent (AMH) CEO David Singelyn

This is a secular shift

“This renewed appreciation for homeownership is evidence of a broader secular shift that will drive higher rates of homeownership for years to come. Further, we believe that LGI Homes with its suburban 100% spec, entry-level focus is particularly well-positioned to benefit from this dynamic” – LGI Homes (LGIH) CEO Eric Lipar

“Our internal applicant data confirms an acceleration of the strong shift in consumer preferences towards renting a single family home over an apartment. This shift of consumer demand that was already present before the pandemic is likely to remain in place after the pandemic is over..Our second quarter applicant data highlights a clear trend that COVID is driving more apartment renters to high quality, suburban, single family rental homes that are professionally managed with service similar to that of Class A multi-family communities” – American Homes 4 Rent (AMH) CEO David Singelyn

“The great reshuffling is driving unusually high interest in home shopping. As the category leader, synonymous with real estate, we hit a record 218 million average monthly unique users this quarter. During the month of June, we grew users on Zillow Group sites and apps by more than 32 million year-over” – Zillow Group (Z) CEO Rich Barton

Rent paid this month is a function of previous month openings

“the rent that people pay us tends to be a function of where they were open the previous month. So hence May was sort of the low month in the quarter for – second quarter for collections, because everybody was closed in April. And as people opened up and made and things got better in June and so on so forth, so that would the lag. So now that’s been predicted so far, I can’t promise that will be predictive for August or September, but to date that’s been a relationship” – STORE Capital Corporation (STOR) CEO Chris Volk

Miscellaneous Nuggets of Wisdom:

Learnings from the previous downturn: Invest through the crisis & invest in people

“First, let me talk about my learnings during the last recession, which was a housing-led recession and my former employer, we felt it hard. They lost 25% of the top line during that recession. Two key learnings during that time. One, invest through the crisis. No better opportunity, if you have the financial wherewithal to do so, to invest through the crisis. So that when things settle down, you are positioned to take share..My second learning is to invest in your people. Now it doesn’t mean that you don’t have a fewer people in a downturn, but for those people that you have, you need to invest in” – United Parcel Service (UPS) CEO Carol Tomé


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