Retail Sales Optimism & Central Bank Stimulus

could say. We're getting certainly some very weak numbers coming out of your even Germany, which tends to leave the European Union. We have the Chinese economy still growing but at a slower rate. And here in the US kind of some cross currents, the manufacturing sector showing some signs of weakness, yet the consumer remains quite strong. So to get a sense of kind of where we are on the economic outlook, we welcome Constance Hunter. She is a

chief economist for KPMG. Joins us on the phone. Constance, thanks so much for joining us. Guess let's start with the consumer. We got the retail sales this morning came out a little bit better than expected, suggesting that you know, despite a lot of the uncertainty in the market, the consumer remains generally pretty strong. Yeah, it was. It was a pretty good report, But we're also getting to the point where we need to parse the signal from the noise.

So as we proceed through the remainder of the year, because retail sales is a nominal data series and not adjusted for inflation, uh, we may start to see some strength in areas where tariffs are being applied, So we may begin to see price increases or what seems like more consumption, and it's important to consider what have prices done in those areas. Are those really um real increases or are they just nominal increases due to some some

pockets of inflation due to tariffs. So that's the first thing, um, And the second thing is just to sort of consider where we are in relationship to last year. So when we when we look at the control group, which is obviously excluding auto's, gasoline and building materials, it's up you over year, and um it is doing better than en

was up four point seven. We did a we did a three month moving average just to kind of smooth out some of the noise and even with that, this most recent report showed a year every year increase of four point nine percent, so that gives us some hope that the consumer is remaining strong. With that said, it's um one of these what I would call war starts war sharts, uh, you know, pieces of data. There's something in there for everybody, depending upon what you want to see.

So um one area of concern was the decline in food services and drinking establishments UM so that was up at about six and a half percent pace in eighteen and this most recent report takes it down below three percent. So so that does give us a little bit of pause. It tends to be one of the more leading indicators of how consumers are feeling. UM. So we'll be watching that closely to see if it rebounds in the next couple of months. Consence, how concerned were you about that?

I sm data that came out recently, I think last week that came into forty nine point one reading suggesting that the manufacturing economy in the US is contracting. How concerned are you about that? Overall? So at first I would say we within any given business cycle often go through sort of what I would call mini manufacturing recessions. UM. So uh, it's not always a cause for concern, but to me, UM, what we're what we're seeing is we're

seeing it with a confluence of other things that are concerning. Right. So we see this UM, it's it's first of all global and nature. Uh. Second of all, it is coming at a time where we've had six consecutive quotas of negative real estate investment. It's coming at a time where

we see broad business investment slowing rather substantially. UM. And so it is, Uh, it is something we're watching very closely, and where in the past we may not have been as concerned, uh, that it would spill over into the consumer. That's that's why we're watching something like this UM eating and drinking establishments to determine. Hey, you know what we're seeing this a little decline here in this somewhat leading

indicator of how consumers are feeling. Let's keep our finger on the pulse of that to see if that is a sign that this manufacturing recession is spilling over to the services economy. Right. So, you know, we hear Bloomberg Radio, We thought that ECB news we got yesterday about the you know, the rate cut and then really the q E infinity, if you will, was really big news. What was your takeaway? Well, one, I think it was pretty expected.

Uh so Uh. Nevertheless, I think markets if you look at the FX markets, you know, while it may have been expected, it certainly wasn't fully priced in UM. And I think it raises a lot of questions. Um, it raises a lot of questions if this is a fact, is if it's going to result in the turnaround uh in the European economies that uh that central bankers are hoping.

And I think Jogging made it pretty clear that monetary policy cannot be the only one doing the heavy lifting that in uh certain economies, in certain cases, we need to see fiscal policy step in and and and give an assist to monetary policy. Because if we leave it all up to monetary policy, especially when we're negative rates, um, you know, it's it's not going to necessarily yield the

results that they're hoping for. So content next week we have the FED decision, So obviously the markets pricing in a FED rate cut. Kind of what is your view of how they will play it over the next call it six or twelve months? Yeah, So I hate to use this phrase because I don't mean it to be a cop out, but it is I think, going to

be data dependent. UM. They have they went from a stance of hiking three times this year to job owning and saying, listen, we're going to be patient, to now they're in what uh what powelled her a mid cycle adjustment UH and hoping that it's it's like the nineties when when there were two sort of mid cycle adjustments UH. And certainly the sectors that are interest rate sensitive, like manufacturing, that is an interest rate sensitive sector, so lower rates

should help that sector. Also, we saw, as I mentioned earlier that UM decline in residential investment. We've seen mortgage rates come down almost a hundred basis points. That should certainly help real estate. UM. One of the things people are pointing to in this increase in in auto sales today is is that car loans have come down. And so they're going to watch and be and and look at the data and see has has what we've done UM caused interest rate sensitive sectors to see a rebound UH,

in which case we may not need to. We may not be in a full blown rate cutting cycle. I think UM. One of the things that that is well aware of, and I think the market is pretty aware of its. Yeah, it's kind of over to overdoing it perhaps, Uh concant, We're gonna have to leave it there. Thank you so much for joining us. Constance Hunter, chief economist for KPMG, giving us her thoughts on you know, kind of strong retail sales numbers we had out today and

what does that mean for the FED going forward? Is are we in an easy moment or just a mid cycle adjustment? Well, our recent I p O s just over the last several months, I had some rocky waves. Um, you know, we've had a very successful one very successful I p O in recent times. Back from late twenty nineteen. Was Zoom Video Communications that stock us up about from its I p O. To get the latest on what

is moving Zoom Video Communications, we welcome Kelly Steckelberg. Kelly is a chief financial officer for Zoom Video Communications and that companies based in San Jose, California. Kelly, thanks so much for joining us. Give us a sense of I know you guys reported earnings a couple of weeks ago. What's what did you really talk about? What are you seeing in your business right now and your earnings in your current outlook. Sure, thanks for having me. We had

a really great strong second quarter. We announced Q two revenue of a hundred and forties six million, growing year over year, and we also were profitable from a gap in a non gap basis, which I think our investors are super excited about. Deuilvering a non gap operating margin of four along with a little our thirty million in

operating cash flow. One thing that's interesting is that this growth has come despite the fact that we talk a lot about companies withdrawing some of the spending that they have been making on just our businesses, expanding new technologies, etcetera, in light of some of the trade disputes and sort of the uncertainty. What have you been seeing there in terms of how much business is are willing to spend on their sort of internal infrastructure. Yeah, so Zoom is

great right there. We're a video first communication platform that is really changing the way that people work and customers. You know, people serve their customers. An example of this is we actually are super excited than us. He became a customer into two. It was the largest initial deal to date. They are standardizing on zoom across you know, sixty seven countries offices and they bought two hosts licenses.

So that's a company that's really embracing this video first platform and I think we expect to see that even if people are consolidating or conserving and other areas to spend, they see that this can really make their employees more efficient. So, uh, Kelly. Another I p O that is about to hit the market, hopefully potentially is we work. Give us a sense of how you know your companies impacted by the distributed workforce we're seeing the gig economy. Um, is that a net

positive for you? It is because what Doom allows is even in the big economy, is for people to take their communication virtual office with them anywhere that they go. You can access to from any platform, any device, anywhere. So with some of our cool features like virtual background, you can join a meeting from your PC or from your phone and put up a virtual background so it

looks as if you're in an office or speech. So that makes it really easy for people to be very productive even sitting in for example or we work office may be surrounded by you know, other people, but they want to give the impression that they're sitting in a different location. When we talk about the pace of growth, this company obviously is growing exponentially, is reflected by its share prices, reflected by the enthusiasm of many investors going forward.

Where do you see the biggest case for expansion here for your business? So they we have some more key growth pillars that we're working on into it's continue expansion into the market and enterprise. HSBC is a perfect example of that international expansion. Today, international is about of our revenue, so we see premendous opportunities there as well. We have about eight sales offices around the globe and see no reason in the future why international can't contribute to fifty

of our revenue. We also have a new product, Zoom Phone. So this is a product that was launched in Q one and it is our cloud TV ex polution and super super early days for this product, and yet we're excited about the traction that we're making. We announced that there is a global luxury brand that brought new phone in Q two and they're using the product not only for their corporate offices, but also rolling it up to

all of their real tail locations. So really excited to see a brand like that using Zoom Phone that's early in the game. And then also Zoom Rooms, which is our conference room solution, and this seamlessly brings video communications into the conference rooms in a way that it hasn't been done before, a very cost effective way. Kelly, give us a sense of kind of the competitive landscape for

you guys. I think it's when I think of kind of this business, I think about maybe some big telecommunications companies are big you know, services companies. Who do you compete against and how do you position yourself? Yeah, you're exactly right. When we go into the enterprise, an enterprise organization, for example, there's typically an incumbent and it's typically you know, just go WebEx solutions are in there. That's who we're

seeing compete with. And then in the mass market, we often are competing either with free solutions or other online providers like logged me in. Kelly Stuckelberg, thank you so much for being with us. Kelly Steckelberg is chief financial Officer of Zoom Video Communications UH, joining us from San Jose, California. Zoom has been one I p O that is absolutely skyrocketed since since when it came out earlier this YEurope

more than a hundred and twenty two percent. And interestingly enough, I remember when this first landed and how well it performed, and people said, see it actually matters that they make money, they're not burning cash. Investors like that, and Zoom is delivered again, which sort of shows, you know, perhaps it's less you know, the sort of sexy dream of some of these companies, of of of you know, community adjusted to Avida, but rather the reality of cash talking about

stocks that have been doing very well. Let's talk smart sheet. The CEO currently in our studios here are when we're getting active brokers studios, Mark Mader, chief executive officer of this company. UM he joins us. And before we get into the nitty gritty of your business, what do you do? We help companies unlock the potential of their people. And

for too long, come on, what does that mean? I mean, so we for too long have have relegated our team members to doing I would say that the core fundamentals of productivity send a message, create a document, have a do a video conversation. These are all fundamentally important to how we work. I actually believe and we believe that workers need to do more, they can participate in more. How do you automate something, how do you actually provide

structure to something? How do you put something on the rail so your business can achieve more? And we believe that it's not just the six or seven percent of the I T population. You should be enabling businesses. We think that median employees should participate in those ways. So how do you elevate them from tracking in spreadsheets year over year over year to improving how the process actually works that they can achieve more? Okay, so this is different.

We just had the CFO of Zoom on just before you came on talking about their company. You guys are different from Zoom and Slack, right, we are. I mean we're happy customers of both of those companies and they're they're great communication platforms. I think the differences when you communicate on something and you agree to do something, where does that thing live the things that we just agreed to, those accountabilities, whether it's a project or process or program,

what do we do with it? We don't just talk about it. We actually need a reference point. And for years people have used spreadsheets as the reference point and we're now looking to provide them a better vehicle for those types of things. So you have I think you said eight customers paid customers, Uh, and they spit. They span a whole host of different industries. How customized does this software have to be for each business? Highly configured?

And the reason I say that we're sort of customer When I hear customization, I think of development and cost and complexitiess configuration is the human being wants to make a change. Let them make a change, Taylor, that column definition, the name of the column, what's in the pick list? So what's in the check box? Let them define it. Don't go out and create a spec and have someone

else do it for you. When you connect the person to actually defining what that tracking mechanism is, they care about it more because they were involved in its definition. That's how you create advocacy and engagement simply receiving something from someone else who built it. I think let's just abandon things a little more easily. So is this I'm trying to think your competitive environment? Would this be like a Microsoft because Microsoft Office and things like that is so,

who do you really compete against in this? It's really a new category where you have um you're you're bringing together a number of concepts. You're bringing together intake collection through forms. You're bringing together tracking mechanism which has almost some database to have constructs to it. You have reportability. Now, you could easily say all of those technologies were done

twenty years ago. Mark, They've been around forever. But I would challenge and say, have they been accessible to people? It's not the definition of a new concept, it's can you make it consumable and accessible by the majority of people in a business? And that is where you get that enrollment. That's where you get the value creation. So I'm trying to understand the advantage to this versus just throwing your files up into the cloud and being like you, guys,

it's your job, check it out. If you don't do it, you're fired. That's that's a fairly draconian way of running a bass. That's how they look at it and get paid or I don't get We found that, we found that the modern employee does not respond to such such a post Seattle, New York. Let's talk. So, I think people have choice today and and I think when when you thrust them into an area of of sort of aggressive take it or leave it. People will leave it.

People will absolutely leave it. And I think when when more people understand that there is that there is a better way, they will embrace it. What's frustrating, though, is that when we talk about all this goodness of technology, one of the reason things like Zoom have done well, it's because it's accessible. So when you help let person achieve something, that loyalty goes out. But the it is when you change behavior, it's difficult, right, So it has to be easy enough. It's not just do you see

value in the idea? Can I have a win with it? What I'm hearing is the website is pretty and it's it's pretty self explanatory. I mean that's that's basically because ultimately it's a it's a sort of more complicated idea to track everything. But it sounds like, you know, if you make the interface easy enough, people actually use it, engage with, and all of a sudden it's becomes useful. Correct.

So I'm looking um mark at my Bloomberg terminal, looking at the s M A R is a symbol for your company, and looking at over a couple of years the streets got you growing, you know, top line UM but I don't see profitability. I don't see cash flow positive and that's historically if you look at the Lift or an Uber or some of these other recent tech companies that have come public, the market's kind of push back on that lack of profitability. How come your stock

is kind of weather that. Have you indicated that your investors that you do, in fact have a path to profitability. Yeah. I think one of the reasons why they're they're they're so supportive of the company is we've we've exercised really a sound from physical discipline. So we're growing organically over fifty we're investing because our markets less than two percent penetrated. So when you're retaining on a percentage basis at four percent as a subscription provider, they encourage you to, oh,

now you need to do that with discipline. But that balance between our free cash from our growth rate, it's decidedly healthy, and they're strongly encouraging us to pursue that opportunity. Where are you seeing the biggest potential for growth regionally well when when you're in a two percent penetrated market, even though we're still going extraordinarily well in the US, US represents a little over our revenue. So we see

both massive growth in our home country. We see it internationally where we have presence a team in the UK. We're expanding, as we said on an Orange call into Asia pack as the next stop with our direct team, but we also see new markets. We were one of the few SAS companies that was recently approved at the federal level for the fed RAM program. So now we're looking to bring all the benefits that the commercial sector has had to the agencies, and we see such a

shortage of valuable solutions for this for this population. So what are the key I mean? I know you mentioned international, but are there's some industry verticals that represent growth areas for you guys, because I get them when I see top line growth kind of wonder where's it coming from and how sustainable is it. Yeah, there's some obvious categories like media, um and and technology which are are highly cross company in their collaborative needs. So a tool like

ours beautifully fits into that. But what I would also say is I can't think of an industry today that is internally focused only. The pressure for companies to reach outside of their walls is greater than ever, so it's really it's about why we serve such a diverse group of customers. Real quick acquisitions, anything in the offing. Yeah, we we've just done two in the last six months, so we're we're bringing those to market right now. But

we're absolutely looking at both. One of the reasons we did our follow on in June, what happens if some big tech company wants to come along and buy you. Well, I think it's something where you know you. You focus on controlling your destiny to the best of your ability, create a valuable product, have raving fan customers, do it globally and maintain that optionality, but don't put yourself into a box where you're forced to make that decision. Marketer,

thanks made her. Thanks so much for joining us, Mark as the CEO of smart sheet Again trades on the New York Stock is Strange under the symbol s m A. Are joining us live here on our Bloomberg Interactive Brooker Studio. We appreciate you coming to Mark. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney I'm on Twitter at pt Sweeney.

I'm Lisa Abram Woyds. I'm on Twitter at Lisa abramloits one before the podcast, you can always catch us worldwide. I'm Bloomberg Radio