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Happy Thursday, Everybody, I'm Alex ste alongside normal Linda Paulsweeni is off today.
This is Bloomberg Intelligence Radio.
We bring you all the top news and business, economics and finance through our lens of our Bloomberg Intelligence folks. They cover two thousand companies and one hundred and thirty industries all around the world. We also keep our pulse on the market in all different forms, and today it is about the IPO market. Sale point is ipoing today we're waiting for that first trade. They received orders for
more than twenty times shares available. This is according to people familiar with the matter, and they also upped their IPO range as well, raising about one point three to eight billion dollars shares. Are looking to open about twenty five dollars to share, so hire them that twenty three. So we we're lucky that we have the CEO of sale point Technologies with us Mark McLain, he joins us.
Now walk me through. First of all, congrats.
IPOs are always a really big day and a ton of work, so nice job getting that over the finish line. But how does this IPO mesh with your long term vision for the company?
Well, I think in general, we've tried to stay focused as a business on building great business with our customers and winning.
In the market.
In some ways, what happens in the financial ownership of the business matters a lot, but it doesn't actually affect our day to day lives, if you will, and finding and securing customers and making them successful, that's certainly always our focus. We do think though, that the IPO gets us back out in the public eye a little more.
The importance of what we do and what's called identity security is raising an awareness and importance to the large companies all around the world that we typically serve, and this will help with our visibility.
It'll give us future fuel to grow the business.
We've had a great run as a private company with Toma Bravo.
Some folks know this.
We were public before and before that we were runed by Toma Bravo.
It's a little bit of an interesting.
Story of a PE backed IPO, same PE backed IPO again. But all the while, our focus continues to be on doing great things for our customers and helping them secure their enterprises with identity well.
Cyber threats have continued to increase. How does sale points stay ahead in identity security?
Yeah, what's happened in the world of cybersecurity. There's a lot of shifting things in the landscape. A simple metaphor that sometimes helps folks is that the bad actors are the attackers. Not so long ago, their metaphor was to break the glass and grab the jewels and run. Quite often now, and we've seen this in breach reports, they'll try to sneak in the back of the jewelry store, poses an employee and eventually try to quote clean out
the jewelry store. And that's because they've been able to impersonate, so to speak, an employee, and that's a compromised identity.
What we do is help businesses.
Typically mid to large enterprises around the world, focus on understanding all the identities they have, both human and non human, all the data they care about protecting, and making sure that at any point in time, all of those connections are secure. It's a pretty complex problem at scale.
Who are your competitors right now and how can you help differentiate?
Yeah, the truth is we've got more I like to call them PowerPoint competitors than real competitors. I mean, there's folks that are talking about this space quite a bit, but if you look at what happens day to day when we're out in the market, there's very few companies that are capable of delivering the success at scale that
we have. We're fortunate to be in almost half of the Fortune five hundred, about a quarter of the Fortune two thousand, and they're generally throwing out older legacy products like from Oracle and IBM. There really hasn't been a strong challenger to us in this key space, and that's part of what I think has gotten investors excited about our potential for long term, durable growth.
So another thing that's been in conversation, I'm curious, how are you all planning to address your debt load?
Well, you know, one of the key use of proceeds will be to pay down a lot of the debt. We actually had a little more debt about six months ago. Our backers home a Bravo chose to take some of that debt out with equity before the IPO, and we'll use the bulk of the proceeds from the IPO to pay that debt down significantly, putting ourselves in what they call a debt zero, meaning we'll have as as much more cash as we have debt, which from a financial profile standpoint makes investors really happy.
Why do you guys decide to do the IPO? Now, we were just talking about IPOs in general, and I was talking about an LNG export that went public at seemingly a great time and it didn't go so well. So I wonder why strategically you guys chose right now.
Well, we've been watching markets as everyone has, and I think we were really pleased with the progress of the business. We went private about two and a half years ago. As part of our S one filing, we talked about the fact that as of our third quarter last year, we'd grown the business at thirty percent, We've been able to deliver non gap margins of about fourteen percent and had a strong sense that durable growth would continue. And that was at scale.
We're over an eight.
Hundred million dollar revenue business now and investors don't see a lot of profiles of growth at scale with profit, And I think.
Our sense was that the markets were kind of.
Hungry, so to speak, for new issuances, particularly I think in technology security has been considered a really good market for a long time.
I think we looked like a company.
That would fit many of their requests, so to speak, for a durable growth company in the security space.
How are regulatory shifts driving demand for identity security solutions as enterprises continue shifting to the cloud? How a sale point evolving its offerings?
Well, it's interesting you mentioned that regulatory is indeed part of the landscape we're addressing. Sometimes, you know, audits or the threat of failed audits or not being able to comply with regulations is a driver. But increasingly our space is less about that. Not it hasn't moved away from that, but it's less about that than truly securing their data. Again, what's happened is this concern that data can be compromised
through this lens of identity. If a bad actor can somehow, you know, get in, break in, steal an identity, or in some way get access to data through those identities, they can do a lot of damage, so that focus on truly protecting the data is really more of an issue today than just regulatory compliance.
Before we let you go, what's it like attracting talent right now in the market.
Well, I'd say attracting talent is never easy in a very competitive technology market. I think we're very fortunate at sale Point. One of the things that we pay a lot of attention to is our culture and our values and.
How that shows up.
And as you probably are familiar, a glass Door runs around and surveys the world and tries to understand how companies are doing. We're super pleased they released those results recently. We were number seventeen in the world, and if you want to cut it by an interesting factor, we were the highest ranked tech company with under five thousand employees on glass Door. I think that speaks a lot about the kind of culture and the values that we live
out in our company. It attracts and retains very good talent, and we're very fortunate.
Hey, Mark, we appreciate your time today.
We look forward to catching up with you again once you've had some time to be public. Mark McLain, CEO of sale Point Technologies, ipming today on the Nasdaq. Prices look to indicate to open it round twenty five at iPod about twenty three, so we will keep you updated when that stock officially starts trading.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
We're going to move to a conversation with Christopher Chillino. He's Bloomberg Intelligence senior US machinery analysts, and he's here to talk about Deer earnings. We've got shares of Deer down about one point seven percent right now in trading, and this is after a report that it is having some issues with tough farms economics in focus, Christopher, what has really been the broad strokes of what you got and gleaned from this earnings report today?
Yeah, we knew going into the quarter that was going to be a pretty ugly print, but these results were really, you know, well below even some of the most bearish expectations. The company really continues to underproduce retail them and across the board to bring down some of the excess inventories that the industry has been plagued with. We also sounds like some products there were some timing issues, so products got pushed out to subsequent quarters, which weighed on the
one Q performance. Now, Deer did reaffirm its twenty twenty five net income outlook, and it certainly seems that we are approaching a cyclical trough this year. But just our concern lies that you know, earnings may not be fully de risked here. You continue to see further softness on the LARGEAG side. Used equipment inventories remain somewhat of an overhang.
Currency headwinds are going to be more pronounced in the back half, and really we still have this uncertainty around what the US trade policy is going to be and and what those retaliatory actions are going to be as well.
Well, I was going to say they sound relatively confident they'll be a trough, but then you add on tariffs.
How well does that confidence hold up?
Yeah, I mean that's the million dollar question, right. I mean, I would say that AG historically has had a tremendous amount of pricing power, and Deer in particular, this is a company in a market that even gets positive price in down markets. You know, this quarterly sales were down over thirty five percent, earnings down significantly, and we were still up on pricing. It will add costs, but they have a history and the track record of being able to pass those through.
What has really been the concern for investors out of this report as they're looking forward?
Yeah, I think there's two big concerns here. One is, you know, the expectation is that, yes, twenty five is trough and that we should start to see this recovery build into twenty six. But I still think there's a lot of uncertainty out there as to what the recovery trajectory looks like, just given the uncertainty around trade and tariffs.
You know, I think we're probably looking at a lower for longer type cycle, So maybe we don't get that typical acceleration in the first year after a cyclical trough. So I think investors are still trying to digest that. And then too, you know, the cost side of the equation. It certainly seems that costs are going to go up. How are they going to mitigate that through some of their you know, internal initiatives or even from shifting some production around with their footprint.
I alsom wondering where we are in terms of the cyclicality of equipment, Like are our farmers operating on older stuff that they're going to have to replace or did they already do that, say during the pandemic. So they're good for a while, and it's going to take like really new high tech products to get them to fork over that kind of cash.
I think we're good for a little bit, a little bit of time here. I mean, you have to remember, we had you know, three four strong years of growth up to the twenty twenty three peak. Yes, twenty four was a down year. We were down, you know, fifteen sixteen percent in terms of units on high horsepower equipment. We're looking at somewhere of a twenty five to thirty
percent decline in volumes this year. So that's going to put us you know, at at low's of you know, over the last two decades where we haven't seen before. So from these levels, we think there's probably limited downside risk. But you know, farmers still have the ability to you know, push out some of these replacement purchases at least for another few years.
We think, what do investors really need to see from this company to have a bit of a more positive outlook and to see them actually bypass their competitors.
I think you need to see you know, inventories greater confidence that we've you know, are starting to see some downward movement on inventories. We've seen inventory's peak just these past few months. We're just coming down off that peak. So I think we need to see more progress on the inventory reduction front, not only in the new new equipment, but used equipment as well. And then certainly, you know, higher crop prices are going to help their customers and
ultimately drive equipment purchases. So we've seen a little bit of a rebound in crop prices here over the last three plus months. I think that has you know, spurred some op and ism in the space that you know, maybe we do return to a growth in twenty twenty six, but I think if we continue to see that progress, that would certainly, you know, bode well for the company.
All Right, Chris really appreciated Christopher Cillino, Bloomberg Intelligence Senior US machinery analyst, joining us on Deer.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
All right, one of their asset class that's moving.
Yes, it's definitely a tariff story, but it's also a potential end of war in Ukraine.
Story is oil.
So oil prices are down by about half a percent, but yesterday they got really kicked down the road, down by about two and a half percent on a potential resolution to the conflict in Ukraine. So I wanted to dig more into this with Dan Pickering, chief investment officer at Pickering Energy Partners, joining us here. Dan, it's just the main question, like how are you guys looking at the oil price right now?
Alex That was a very pregnant pod there, Yeah.
It was because there are so many things happening. I know, so many variables, whether they're political, geopolitical, supply demand. We got news today that the IEA International Energy Agency thinks that supply and demand is tightening. We have the risk of Iranian sanctions, We have a Russia conflict that if it concludes, everyone's nervous that well price goes lower because Russian production goes higher.
So many variables.
The way I think about it, supply and demand is generally generally sloppy, not particularly tight. The geopolitical stuff is keeping it a little bit tighter. And so I would take the current seventy one dollars WTI number for twenty five I'd put in the bank if I could get it today.
So, so many things moving right now.
Where would you say is the best outlook for energy investments this year? Gas oil?
Services?
Great question?
Or I think the natural gas is the area that's getting better. If you look, particularly in the US, we have LNG exports that will rise about five percent of total US demand between now and the end of next year early twenty twenty seven, and so the market's very optimistic that we'll see tightening supply and demand. Natural gas prices we're in the twos for most of twenty twenty four, they're in the high threes right now. They're forecasts to be in the fours next year, could be fives. And
so natural gas is the hottest area. I would say services is probably rig count is probably the weakest because drill, baby drill is.
Not on the table.
Just to jump in here more headlines coming out. This is also from CNBC saying that President Trump's reciprocal tariffs I will take effect some months later. So this is not a Today's story, just an announcement story today.
Want we to oh?
Also another head red headline here, Blue Origin is set to cut about ten percent of its work for This is Jeff Bezos's back to Blue Origin. That's quite interesting. It said to cut about ten percent of its workforce. Okay, Dan, there's a lot like you said to unpack, I do want to go so Okay. Last year at Sarah Week, and for those of you who don't know, Sarah Week is when all the energy nerds can mean on Houston and they talk about energy for five days and it's
super awesome. The conversation was, look, you can only own one energy stock in your portfolio now maybe two max, So like you really got to pick the best of the best. And that led to some m and a. It also led to really the Kreme de la Crem stocks doing better than everybody else. Is that narrative still intact or can you own more?
Now?
Is it a different world?
Well, it's definitely a different world. I think that last year, the last couple of years, energy has been a bad word, and there's been a headwind just kind of around the whole space. That headwind's probably turning into a tailwind. Doesn't necessarily mean the commodities improve, but I think sentiments clearly improving. Not clear to me that money flow toward the energy sector is picking up much, and so I think it's
still a very selective market. I kind of think about it as an alpha market, not a beta market right now, and I think it will expand over time. But we've got this opec oversupply that we've got to deal with three million barrels today and all of this geopolitical uncertainty. So the winds are better, I don't know that it's pulling in investors quite yet.
So, Dan, you mentioned natural gas as being one of the potential best outlooks for the energy investments this year. What's the upside case here the commodity or additional exports.
Yeah, so the exports take a long time to put in place, big multi billion dollar projects that take a long time to put in place, and so the export pipeline, if you will, is pretty set from now until the later part of the decade. So the tightness in the market comes from those projects. Turning on the fact that we haven't been drilling aggressively for either oil or natural gas. So the supply sides constrain the demand sides improving. So
it feels like price is the reaction function here. So I'd say that higher price is not more exports, at least not in.
The short room going to oil in the drill baby drill scenario. Is it possible for President Trump to lower the cost curve enough through deregulation less, say methane tax, easing of federal land tax, et cetera, to incentivize more drilling even at say seventy or sixty five oil.
Yeah.
The one word answer there is no. The industry is on a path of capital discipline that says they are not going to spend above their cash flows. In fact, they're returning capital shareolders aggressively, and so at seventy or sixty five dollars a barrel, nobody in the US is drilling more alex. What I think that means is we have to look to the geopolitical piece of this. Maybe price comes down or energy in the US gets cheaper because of things that happened in Saudi Arabia, Iran, Russia, not the.
End of like a Ukraine war kind of exactly.
So there's a big The US government has more flexibility on energy policy than has ever had before because we are running at record levels of production. We are a net exporter, not a net importer, and so the actions that happen internationally around oil markets like the Middle East, for instance, we've got more flexibility than we've had in fifty years.
Quickly, just off of that whole conversation about President Trump wanting drill, baby drill, is that what energy investors want.
No drill, baby drill turned into oversupplied situation, what we call the shale bus that went from twenty fourteen to.
Baby Yeah, exactly, it was.
It was quite awful, and so energy investors have pushed aggressively for companies to stop drilling, stop growing, stop over supplying the market, and instead get more profitable and return those profits to CHERYLD. So it will take more than a request from the Trump administration for US to see an increase in activity.
All right, Dan, it's really good to see you in person. I'll see you in Houston a couple of weeks. That's great, all right, Dan Pickering, Chief investment Officer Pickering Energy Partners, truly one of the best in the industry in terms of energy trends, sector trends, etc. So I'll be catching up with him in Houston for Sarah week.
All right, com up.
Ellen Hayzen will be joining us, chief market strategist and portfolio manager at f L.
Putnam Investment Management.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Coarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Well, welcome back to Bloomberg Intelligence Radio. I'm Nora Melnda here with Alex Steel. I'm filling in for Paul Sweeny.
Today. We are looking at a market that's in the green.
As John was just noting, we have the S and P five hundred up six tens of a percent and the NASDAG up over one percent. We've really got the market that's digests saying jobs data, also PPI data. But really what we're looking forward to is what will bring more clarity in terms of the tariff conversation. Today we're joined by Ellen Hazen, chief market strategist and portfolio manager at f Outputnam Investment Management. She's here to discuss her
outlook on the markets today. Ellen, While the tariff's conversation may be an ongoing negotiation tactic for President Trump, it's obviously putting many investors on edge. How are you currently advising your clients in this uncertain climate?
Thanks for having me. I think that the tariffs are a big question mark right now. Our prediction for the year is that expect the unexpected, expect the unpredictable. So we expect that tariffs and some of the other things that the administration is talking about will lead to higher volatility. So what that means is you want to be extra selective, extra careful about finding companies to invest in and areas of the market to invest in that are not going
to be overly impacted one way or the other. So go a little bit more toward quality, a little bit more towards safety, and don't take any bets that are too big because that can come back to bite you when the unexpected happens.
Which is funny because consumer staples are near an all time high, so it seems like you're not alone in this view, is that where that safety is.
Actually, I think consumer staples is pretty uninteresting right now. It's very expensive, the growth isn't there, and as you've seen with the inflation numbers, you aren't seeing the staples companies able to pass through that cost inflation that they have had on the input cost side. You saw that with Mondolis, You're seeing that with a lot of staples companies. So I want quality and I want predictability. But in
my mind that does not actually mean consumer staples. It means growth areas where the growth is not going to be subject to cost changes or inflation, where the growth is being driven by underlying forces.
So where is this quality, Where is this safety?
Is that an equities?
Bonds?
Maybe FX, So we like equities more than bonds. We think rates are going to stay higher for longer, which makes us cautious on bonds in general, and then in particular, corporate spreads are very tight, as you know, in terms
of FX. We still think the dollar will remain strong, so we're sticking with US, and we think that equities are actually the best hedge against inflation, So we would want to stay in US equities, and particularly those that have increasing earnings estimates that are writing growth curves, whether that's artificial intelligence, not just in the chip and hardware space, but also in the software space, whether that's healthcare and
new drugs getting approved, whether that's some areas of consumer discretionary. But we want to own companies that are growing, that are seeing their earnings inflect positively.
What if how do you manage Okay, let me just retrack that. What if tariffs kind of go away, as if like we're all prepping to avoid the drug But if this is just going to be, you know, some negotiating tactic and the drama is avoided, what then becomes interesting.
I think it's really difficult to make a bet based on tariffs or no tariffs. Yeah, I would seek to look for those companies that are going to be somewhat immune to tariffs. Either way, I don't know that they do go away instantly. I think that this is a tool in the toolkit that the administration is probably going to pull out more than once. So even if they go away in the short term, as they have for Mexico and Canada, they might not go away in the
long term. So I think I would have trouble expecting that tariffs are going to be something that's absent for the longer time horizon if they do go away. I think the obvious areas are things like automobiles and other areas that are imported from China and so forth. But I'm not sure that that's the wisest way to invest at the moment, just because I think this is going to continue to be on predicted.
Well, there's been lots of different conversations about what could be going on in the government and what changes to expect moving forward. How are you thinking about the potential impact of DOGE and how it may affect different parts of the economy, and of course how that changes your investment decisions, if at all.
I would love to see a lot more transparencies with respect to DOUGH so that we under so that we understand exactly what's going to happen there. I think the biggest issue, or the biggest negative impact of DOGE is going to be if many millions or hundreds of thousands of government employees are lego, that's going to be a
significant negative hit to the economy. So I think we want to understand how many people are going to be let go, what areas of the economy those are in and whether or not that means that the consumer and those households impacted is going to really take take a hit.
All right, thanks so much, Ellen, really appreciate it. Ellen Hazen joining us. She is chief Arches Strategists and portfolio manager at fl Putnam Investments.
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