In this article, we will discuss the 16 best vodka brands under $30. If you want to see more brands in this selection, go to the 5 Best Vodka Brands Under $30.

According to Maximize Market Research, the size of the vodka market is set to increase from $44.88 billion in 2021 to $89.03 billion by 2029. This reflects a compound annual growth rate (CAGR) of 8.94%. The rate is higher than the expected CAGR of 5.9% for the whiskey industry. Russia occupies the top position in the list of countries that consume the most vodka on a per-person basis. According to Euromonitor, an average Russian has 17.28 shots of vodka every month. Meanwhile, Poland and Ukraine are in the second and third position on this list, with a per-person vodka consumption of 13.71 shots and 9.96 shots, respectively. The US sits at the sixth position with an average monthly consumption of 3.76 shots only.

Smirnoff, Absolut, and SVEDKA Vodka are a few of the best-known vodka brands in the world, owned by famous companies like Diageo plc (NYSE:DEO), Constellation Brands, Inc. (NYSE:STZ), and Pernod Ricard SA (EPA:RI). With many businesses highlighting their use of natural, regional ingredients and applying eco-friendly manufacturing techniques, the vodka sector has also experienced a rising trend towards environmentally friendly and organic production methods. The vodka industry is characterized by intense competition and innovation, with frequent introductions of new brands and flavors aimed at satisfying the ever-changing tastes of consumers. A variety of grains, potatoes, and other plant-based ingredients can be used to make vodka. Although some manufacturers also utilize less typical grains like quinoa, sorghum, or even grapes, the most common grains used to make vodka are wheat, rye, corn, and barley. The type of grain used can significantly influence the flavor, texture, and character of the final product. The alcohol industry appears to be experiencing significant growth, with even established companies expanding their product offerings to enter this profitable market. You can also read 21 Best Tequila Brands of 2023 to know more about the industry trends.

Photo by Adam Wilson on Unsplash

Our Methodology

To shortlist the best vodka brands under $30, we went through 20 lists developed by vodka experts, bartenders, and vodka enthusiasts, assessing the quality, aroma, and flavor of vodka. Some of the sites we consulted include Liquor.com, Vinepair, and Insider.com. We ranked the best vodka brands according to the number of times each of them appeared on these 20 lists. Every time a brand was recommended or ranked in any of the lists we consulted during our research, it received a score of 1. The brand that received the highest number of recommendations secured the first rank on our list. We have also provided the average price of each of the vodka brands for a 750 ml bottle.

Best Vodka Brands Under $30

16. Seagram’s Platinum Select Vodka 100 Proof

Score: 3

Average Price: $13.19

Seagram’s Platinum Select Vodka 100 Proof is a high-proof vodka made from a blend of the finest American grains. It is distilled five times and then filtered through charcoal for a smooth and clean taste. With proof of 100, it is considered a “high-proof” vodka, meaning it has a higher alcohol content than many other vodkas on the market. This vodka is known for its versatility, making it suitable for both straight sipping and mixing in cocktails. Its smooth taste and high alcohol content make it an excellent choice for those who enjoy strong, bold flavors in their drinks.

15. Chopin Potato Vodka

Score: 3

Average Price: $21.09

Chopin Potato Vodka is a premium vodka produced by the Poland-based Chopin Vodka company. Unlike most vodkas, which are made from grains like wheat or rye, Chopin Potato Vodka is made entirely from potatoes. The potatoes used to make the vodka are carefully selected and sourced from local farms in Poland. The production process involves cooking and fermenting the potatoes, then distilling the resulting liquid several times to achieve a high level of purity. The final product is then bottled at 40% alcohol by volume (ABV) and distributed around the world.

14. Haku Japanese Vodka

Score: 3

Average Price: $26.99

Haku Japanese Vodka is a leading vodka brand produced by Suntory, a Japanese beverage company. Haku means “white” in Japanese, symbolizing the purity and clarity of the spirit. Haku Japanese Vodka is made from 100% Japanese white rice, which is polished to remove impurities and create a clean and crisp taste. The vodka is distilled three times in a pot still and then filtered through bamboo charcoal to remove any remaining impurities and to create a refined finish.

13. Effen Vodka

Score: 4

Average Price: $20.49

Effen Vodka is one of the finest vodka brands globally that was first introduced in the US in 2003. The brand is owned by Beam Suntory, Inc. It is produced in the Netherlands using a continuous distillation process, which results in pure vodka. The name “Effen” comes from the Dutch word for “smooth,” which is a nod to the vodka’s velvety texture. The brand is known for its sleek and modern packaging, which features a distinctive, frosted bottle with a rubber sleeve for easy grip. Effen Vodka is available in a variety of flavors, including original, black cherry, cucumber, blood orange, green apple, and raspberry.

12. New Amsterdam Vodka

Score: 4

Average Price: $12.99

New Amsterdam Vodka is a popular brand of vodka produced in the US by E&J Gallo Winery. It is named after the city of New Amsterdam, which later became New York City. The vodka is made from grains and is distilled five times before being filtered three times through activated carbon to create a smooth taste. New Amsterdam Vodka was first introduced in 2011 and has since become popular due to its affordable price point and suave taste. It is often used as a base for cocktails and mixed drinks but can also be enjoyed on its own.

11. Ciroc Vodka

Score: 4

Average Price: $29.99

Ciroc Vodka is produced in France and is distributed by the international alcoholic beverage producer Diageo plc (NYSE:DEO). The grapes used in the production of Ciroc Vodka are harvested from the Gaillac and Cognac regions of France, and the vodka is distilled five times to create a clean and smooth flavor. Ciroc Vodka was introduced in the US in 2003 and has since gained widespread popularity due to its unique grape-based production process and high-quality taste. Ciroc Vodka is often associated with luxury and is a favorite among celebrities and high-end bars and restaurants.

10. Belvedere Vodka

Score: 4

Average Price: $27.99

Belvedere Vodka is a top-of-the-line vodka brand that originated in Poland. The vodka is manufactured and distributed by LVMH (EPA:MC). It is made from 100% Polish rye and water from the distillery’s well. The brand was introduced in the US in 1996 and has since become popular around the world. Belvedere Vodka is known for its clean finish. The vodka is distilled using a four-column distillation process, which helps to remove impurities and create a high-quality product.

9. Russian Standard Vodka

Score: 4

Average Price: $17.00

Russian Standard Vodka is produced by Roust International. It is made from winter wheat grown on Russian steppes. The brand was launched in 1998 by Roustam Tariko, who wanted to create a vodka that would embody the spirit of Russia and its centuries-old tradition of vodka-making. Russian Standard Original Vodka is a classic Russian-style vodka that is distilled four times and filtered through charcoal and quartz sand. The result is a clean-tasting vodka with a mildly sweet flavor and a creamy texture.

8. SVEDKA Vodka

Score: 4

Average Price: $12.99

SVEDKA Vodka is a popular Swedish vodka brand that was first launched in the US in 1998. It is owned by Constellation Brands, Inc. (NYSE:STZ). The name “Svedka” is a combination of the words “Sverige” (the Swedish word for Sweden) and “Vodka.” Svedka Vodka is made from a blend of Swedish winter wheat and pure spring water and is distilled five times. The brand offers a variety of flavors, including original, strawberry lemonade, cucumber lime, and blue raspberry. Overall, Svedka Vodka is a well-regarded brand in the vodka market, known for its quality and wide range of flavors.

7. SKYY Vodka

Score: 5

Average Price: $14.49

SKYY Vodka is a brand of high-end vodka that was introduced in the US in 1992. It is produced by SKYY Spirits LLC, a subsidiary of Gruppo Campari. SKYY Vodka is made from American grain and water that undergoes a four-column distillation and triple filtration process. The vodka is then blended with water to achieve the desired proof before bottling. In addition to the classic SKYY Vodka, the company also offers several flavored vodkas, including citrus, pineapple, raspberry, and grapefruit. SKYY Vodka is available in many countries around the world and is a popular choice for cocktails and mixed drinks.

6. Absolut Vodka

Score: 6

Average Price: $19.99

Absolut Vodka is a popular brand of high-quality vodka introduced in Sweden in 1879. It is produced by the Swedish company, The Absolut Company, which is a subsidiary of Pernod Ricard SA (EPA:RI). Absolut Vodka is made from Swedish winter wheat and water from a deep well in Åhus, Sweden. The vodka then undergoes a unique continuous distillation process that removes all impurities. The brand is known for its iconic marketing campaigns, which have featured creative and eye-catching ads, such as the “Absolut Nights” campaign. The brand has also collaborated with artists and designers to create limited-edition bottles with unique designs.

In addition to Absolut Vodka, Ketel One Vodka, Smirnoff Vodka, and Stolichnaya Vodka are also some of the best vodka brands under $30.

Click to continue reading and see the 5 Best Vodka Brands Under $30.

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Disclosure: None. 16 Best Vodka Brands Under $30 is originally published on Insider Monkey.

In this article, we will discuss the 5 best vodka brands under $30. If you want to see more brands in this selection, go to the 16 Best Vodka Brands Under $30.

5. Grey Goose Vodka

Score: 6

Average Price: $24.09

Grey Goose Vodka is owned and produced by Bacardi. The brand was created in France in the late 1990s by Sidney Frank, an American businessman, and was first introduced to the US market in 1997. Grey Goose is made from high-quality French wheat, which is distilled and blended with pure spring water from the Cognac region of France. The vodka is distilled using a five-step process that involves continuous distillation, resulting in a pristine taste. Grey Goose is known for its sleek and elegant packaging, featuring a frosted glass bottle with a unique cork stopper.

In this article, we will discuss the Top 10 Growth Stocks in Biotech. You can skip our industry overview and go directly to the Top 5 Growth Stocks in Biotech.

The biotech industry encompasses a wide range of fields, including genetic engineering, biomanufacturing, bioinformatics, and synthetic biology. It has the potential to transform many aspects of our lives, from healthcare to food production to environmental sustainability. The rising investments in the sector are a testament to the growth potential of biotechnology. According to an EY Report, 68% of publicly traded biotech companies in the US and Europe increased their Research and Development spending in 2021, collectively investing $43 billion to develop the next generation of therapies and drugs.

The biotechnology sector is a subset of the healthcare sector, which represents 20.3% of the S&P Pure Growth Index, ranking second only to the Energy sector. Two biopharmaceuticals firms, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) and  Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), are among the top 10 firms in the index as per weightage.

The biotechnology sector came into the limelight in 2020 after the COVID-19 pandemic, as all eyes were set on biotech companies and their development of COVID-19 vaccines. The industry delivered on its promise with the development of MRNA-based vaccines. Several biotech stocks soared to new highs. For example, BioNTech SE’s (NASDAQ:BNTX) stock was trading in the $20s at the start of 2020, but by the end of the year, the stock was trading at over $100.

The biotech sector is highly regulated, and the success of companies hinges on the outcome of clinical trials for potential blockbuster drugs and subsequent approval by the Food and Drug Administration. Roche Holding AG (OTC:RHHBY) experienced its most significant stock price decline in over two years in May 2022 due to the failure of the second phase 3 trial for its new immunotherapy, tiragolumab.

Photo by National Cancer Institute on Unsplash

The biotech industry experienced a challenging year in 2022, as evidenced by the Nasdaq Biotech Index closing at 4,213.13, reflecting a 12% decrease from its closing value in 2021. The sector grappled with a challenging macro environment. However, the biotech industry has shown signs of recovery after a difficult year, with the XBI biotech index rebounding in the latter half of 2022. The positive momentum has been driven by favorable drug launches and clinical readouts.

Looking forward, a more permissive regulatory environment in areas like rare disease or gene therapy, to which many small-cap companies are tied, should also spur overall sentiment. However, weaker companies may face restructuring and dilution, limiting overall index performance. To read more about Biotech startups and their potential use cases, you can head on to 12 Most Profitable Biotech Stocks Today.

Our Methodology

For this article we used stock screeners to identify high growth biotech stocks. We screened profitable biotech stocks on a net income TTM basis and revenue growth of at least 50% over the past four quarters. The list is ranked in ascending order of the YoY revenue growth metric.

Top 10 Growth Stocks in Biotech

10. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX)

Revenue Growth YOY: 291.46%

Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is a biotechnology company based in the United States. The company engages in drug discovery through experimental biology by integrating technological innovations across biology, chemistry, data science, engineering, and automation. Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) is currently developing various products for several oncological disorders as well as rare and other diseases like Cerebral Cavernous Malformation and Clostridioides difficile Colitis.

On February 27, 2023, Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) announced its fourth quarter 2022 results. The company reported a revenue of $13.68 million, missing market expectations by $10.32 million. The Normalized EPS stood at $0.30, missing market estimates by $0.06.

In addition to Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX), Orchard Therapeutics plc (NASDAQ:ORTX), Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), and Ascendis Pharma A/S (NASDAQ:ASND) are included in our list of top 10 growth stocks in biotech.

As per Insider Monkey’s database, 13 hedge funds held stakes worth $194 million in Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) in Q4 2022, compared to 15 funds in the prior quarter with stakes worth $243 million.

Here is what Lux Capital has to say about Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX) in its Q2 2022 investor letter:

As we discussed before describing “Extensionalism”, one of our theses has been the growing convergence between the biological and technological, the organic and inorganic, man and machine. Lux has made investments in the digitization, technological capture and amplification of each of the human senses. Consider vision and speech: we have technology that can rapidly recognize and label objects from pixels (companies that span defense, biotechnology, manufacturing and transportation like, Recursion (NASDAQ:RXRX), and others that can rapidly generate videos, images, and even more complex language from simple inputs.

9. Lineage Cell Therapeutics, Inc. (NYSE:LCTX)

Revenue Growth YOY: 295.58%

Lineage Cell Therapeutics, Inc. (NYSE:LCTX) is an American clinical-stage biotechnology corporation. The company develops cell-based therapies by creating specific cell types from pluripotent stem cells (PSCs) to cure severe illnesses, including cancer and degenerative disorders. The product pipeline of Lineage Cell Therapeutics, Inc. (NYSE:LCTX) consists of OpRegen, OPC1, ANP1, PNC1, and VAC2, which are focused on therapeutic areas of ophthalmology, neurology, demyelination, and immuno-oncology.

According to Insider Monkey’s database, 10 hedge funds held stakes worth $44 million in Lineage Cell Therapeutics, Inc. (NYSE:LCTX) in Q4 2022, compared to 9 funds in the prior quarter with stakes worth $43 million.

8. Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX)

Revenue Growth YOY: 339.42%

Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) is a clinical-stage pharmaceutical corporation based in the United States. The company primarily focuses on developing therapeutics for patients with rare endocrine disorders and related tumors. Paltusotine is the company’s lead product candidate, which is being developed to treat acromegaly, a rare condition in which the body produces unusual amounts of growth hormones. Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) is also developing products for several other diseases, such as hyperparathyroidism, obesity, and diabetes.

As per Insider Monkey’s database, 23 hedge funds held stakes worth $485 million in Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) in Q4 2022, compared to 19 funds in the prior quarter with stakes worth $479 million.

7. Ardelyx, Inc. (NASDAQ:ARDX)

Revenue Growth YOY: 416.57%

Ardelyx, Inc. (NASDAQ:ARDX) is an American biopharmaceutical company. The company engages in the development and sale of medicinal drugs to treat cardiorenal and gastrointestinal disorders. IBSRELA® (tenapanor) is the first approved product of Ardelyx, Inc. (NASDAQ:ARDX), and it is used to treat irritable bowel syndrome with constipation (IBS-C). The product pipeline of the company comprises Tenapor, which is under development to treat hyperphosphatemia, RDX013 for the treatment of hyperkalemia, and RDX020 for metabolic acidosis.

On March 3, 2023, Laura Chico, an analyst at Wedbush, increased the price target of Ardelyx, Inc. (NASDAQ:ARDX) to $6 from $3 and upgraded the rating on the company’s shares to Outperform from Neutral. According to the analyst, the company’s product IBSRELA® (tenapanor) is slowly advancing towards targets, while the regulatory route of XPHOZAH® (tenapanor) is beginning to become more visible.

As per Insider Monkey’s database, 13 hedge funds held stakes worth $59 million in Ardelyx, Inc. (NASDAQ:ARDX) in Q4 2022, compared to 19 funds in the prior quarter with stakes worth $42 million.

6. Immunocore Holdings plc (NASDAQ:IMCR)

Revenue Growth YOY: 441.99%

Headquartered in the United Kingdom, Immunocore Holdings plc (NASDAQ:IMCR) is a multinational commercial-stage biotechnology corporation. The company develops immunotherapies for unmet needs in infection, cancer, and autoimmune disorders. Immunocore Holdings plc (NASDAQ:IMCR) has developed KIMMTRAK, an anti-cancer medication for the treatment of adult patients with metastatic uveal melanoma. The company also has several other products in the pipeline, such as IMC-I109V for the treatment of hepatitis B virus (HBV) and IMC-M113V² for human immunodeficiency virus (HIV).

On March 1, 2023, Immunocore Holdings plc (NASDAQ:IMCR) announced its fourth quarter 2022 results. The company reported a revenue of $57.76 million, surpassing wall street estimates by $4.08 million. The Normalized EPS stood at $0.65, falling short of market expectations by $0.69.

According to Insider Monkey’s database, 19 hedge funds held stakes worth $603 million in Immunocore Holdings plc (NASDAQ:IMCR) in Q4 2022, compared to 19 funds in the prior quarter with stakes worth $518 million.

Last month Immunocore Holdings plc (NASDAQ:IMCR) presented safety and activity data on IMC-M113V, a bispecific soluble TCR therapy for treating people living with HIV. The data, presented at the Conference on Retroviruses and Opportunistic Infection, showed that all three dose levels of IMC-M113V were well-tolerated, with no significant adverse events, changes in hematology or chemistry, cytokine release syndrome, or neurotoxicity.

Click to continue reading and see Top 5 Growth Stocks in Biotech.

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Disclosure: None. Top 10 Growth Stocks in Biotech is originally published on Insider Monkey.

In this piece, we will take a look at the Top 5 Growth Stocks in Biotech. For more such companies, go to the Top 10 Growth Stocks in Biotech.

5. Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA)

Revenue Growth YOY: 471.24%

Headquartered in Bermuda, Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) is a biopharmaceutical company focusing on therapeutics for debilitating disorders. The company has developed Arcalyst (rilonacept), which is a medication used to treat recurrent pericarditis. Other products in the pipeline include Mavrilimumab for the treatment of giant cell arteritis and KPL-404 for the treatment of rheumatoid arthritis.

On March 1, 2023, David Nierengarten, an analyst at Wedbush, reduced his price target on Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) to $20 from $26 while keeping an Outperform rating on the company’s shares. The analyst believes that the shares are cheap at current levels, and the company has excellent commercial momentum on its side.

According to Insider Monkey’s database, 19 hedge funds held stakes worth $160 million in Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA) in Q4 2022, compared to 13 funds in the prior quarter with stakes worth $140 million.

In this article, we will discuss the 15 Biggest Private Oil Companies in the World. You can skip our industry overview and go directly to the 5 Biggest Private Oil Companies in the World.

Oil is an essential resource powering industries and economies around the world. The industry is dominated by large multinational corporations, such as Exxon Mobil Corporation (NYSE:XOM), BP p.l.c. (NYSE:BP), Shell plc (NYSE:SHEL), and Chevron Corporation (NYSE:CVX), which account for a significant portion of global oil production. However, there are also numerous smaller companies, both public and private, involved in various aspects of the oil industry. The integral role it plays in the overall economy of a country is the reason why many countries have nationalized their oil sector to exercise more control over oil reserves. Some of the largest state-owned oil companies include PetroChina, Rosneft, and Petroleos de Venezuela.

Russia’s war on Ukraine saw global oil prices soaring oversupply concerns. As European countries looked for alternatives to their energy imports and the West put sanctions on Russia, the markets soon realized that there might be a shortage of supply in the market, with Russia being a major oil producer. Hence, the brent oil price crossed $100 for the first time after 2014 in 2022. However, with the start of the Fed hiking cycle and a slowdown in global economies, the oil demand has slowed down in recent months and has come down below $100 in 2023. However, with China opening up and relaxing COVID restrictions, the global oil demand is expected to gain strength in the near term.

As per IEA, global oil demand is projected to increase by 1.9 mb/d, reaching a total of 101.7 mb/d in 2023, with a significant portion of the growth coming from China after the easing of Covid-related restrictions. On the other hand, the global oil supply growth is expected to decelerate to 1 mb/d after last year’s 4.7 mb/d growth led by OPEC+. OPEC has also increased its forecast for global oil demand growth in 2023, primarily due to the relaxation of COVID-19 restrictions in China. As per OPEC, Chinese demand will grow by 590,000 barrels per day in 2023. The supply-side is expected to remain tight in 2023 with the organization reducing its supply forecasts for non-OPEC producers, which could lead to a tighter market and support oil prices.

Photo by Zbynek Burival on Unsplash

The Renewable Energy Factor

The global oil and gas industry is going through a major transition, driven by the climate change emergency. As per BP, global oil demand is expected to reach a peak level near the 2030s as the Russian invasion of Ukraine has accelerated efforts towards sustainable and clean energy. Governments around the world are now seeking to improve energy security by increasing the proportion of renewables in their energy mix.

Due to the implementation of supportive policies, O&G companies have been able to raise their investments in clean energy, which is expected to fast-track the transition towards clean energy. The United States has passed two acts between 2020 and 2022, namely the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act, which provide for approximately $450 billion of clean energy and related investments. Additionally, the Securities and Exchange Commission (SEC) has proposed rules that require companies to disclose their emissions in their SEC filings. Moreover, The European Commission has approved two plans, namely the Fit for 55 climate package and Europe’s REPowerEU plan, which together provide nearly €300 billion in provisions for the clean energy transition and emissions reduction.

Our Methodology

To come up with the 15 biggest private oil companies in the world, we identified the biggest oil companies in major economies and ranked these companies in ascending order in order of their annual revenue. Our list contains companies that are not listed publicly and are held by private individuals/corporations. Our list also includes state-owned enterprises. We have sourced revenue data from multiple websites, including Fortune 500 and Statista.

Biggest Private Oil Companies in the World

15. Oman Oil Marketing Company

Annual Revenue 2021: $22.70 billion

Oman Oil Marketing Company is a state-owned energy investment corporation that operates in 17 countries around the world. The company’s business units comprise upstream, downstream, commercial, and alternative energy segments. Through its products, Oman Oil Marketing Company serves a variety of industries, including food, agriculture, packaging, construction, functional fluids, automotive, medical care, and personal care. The company provides a broad line of petrochemicals and petroleum products, including various polymers, intermediate chemicals, derivatives, and refined products. The company markets its fuels and chemical products in more than 60 countries across the globe.

In addition to Oman Oil Marketing Company, China National Petroleum Corporation, Sinopec Group, and Reliance Petroleum are included in our list of 15 Biggest Private Oil Companies in the World.

14. Surgutneftegas

Annual Revenue 2021: $25.60 billion

Surgutneftegas is a Russian oil and gas corporation that was formed via the amalgamation of formerly state-owned companies with significant oil and gas reserves. The company engages in both upstream and downstream segments of the oil and gas industry, including the exploration, production, refining, and marketing of oil, gas, and its products. The sales network of the company comprises 5 subsidiaries that manage wholesale, retail, and storage of petroleum products and provide other services at gas stations.

13. CEPSA

Annual Revenue 2021: $26.40 billion

CEPSA is a multinational oil and gas corporation based in Spain. The company is also present in other countries, including the United Arab Emirates, Algeria, Colombia, and Peru. The major businesses of CEPSA comprise exploration & production, chemicals, commercial & clean energies, trading, and sustainable mobility. CEPSA is transforming its refineries to reduce its carbon footprint and develop new environmentally friendly products.

12. Petrovietnam

Annual Revenue 2021: $27.10 billion

Petrovietnam is an oil and gas corporation in Vietnam that operates in the oil & gas and renewable energy sectors. The major business activities of the company comprise exploration, production, petrochemicals, refining, the gas industry, and petroleum technical services. Petrovietnam also generates power through non-renewable and renewable energy sources. With a combined installed capacity of 5405 MW (megawatt), the company operates 4 gas power plants, 2 coal power plants, and 2 hydro-power plants.

11. CPC Corporation

Annual Revenue 2021: $30.02 billion

CPC Corporation is a state-owned petroleum corporation based in Taiwan. Due to limited natural resources in Taiwan, CPC Corporation relies on imports and foreign operations to meet its fossil fuel needs. In 2021, together with international oil corporations, CPC Corporation was engaged in 10 oil and gas exploration and production projects in 8 countries. Presently, the upstream operations comprise both onshore and offshore oil and gas fields in Taiwan and other countries. CPC Corporation runs two refineries in Taiwan, with a total refining capacity of 600,000 barrels of crude oil per day. Further downstream operations include refining and production of petrochemicals, imports, marketing, storage, and transportation operations.

10. GS Caltex Corporation

Annual Revenue 2021: $30.18 billion

Headquartered in South Korea, GS Caltex Corporation is an oil refiner jointly owned by GS Group and Chevron Corporation (NYSE:CVX). With a daily refining capacity of 800,000 barrels, the company refines 80 types of crude oil that it imports from approximately 30 countries across the United States, Europe, the Middle East, Australia, and Southeast Asia. These products are supplied to around 2,400 service stations, 400 filling stations, factories, and airline and railway operators in Korea.

9. Sonatrach Petroleum Corporation

Annual Revenue 2021: $34.50 billion

Sonatrach Petroleum Corporation is a state-owned oil corporation based in Algeria. The product line of the company includes kerosene, gasoline, distillate and residual fuel oils, and lubricants. Sonatrach Petroleum Corporation also provides shipping services through its wholly-owned subsidiaries, such as Sonatrach Gas Carrier Corporation, Sonatrach Petroleum Overseas Transportation Corporation, and Alrar Transportation Corporation.

8. China National Offshore Oil Corporation

Annual Revenue 2021: $38.10 billion

China National Offshore Oil Corporation is among the largest oil companies in China. The company has the exclusive rights to collaborate with foreign corporations on initiatives outside of China. Major operations of China National Offshore Oil Corporation include the exploration, development, and refining of oil and gas. In addition, the company also offers power generation, new energy development, and financial services. The international division of the company oversees operations in Africa, the Americas, Europe, Asia, and the Middle East.

7. Kuwait Petroleum Corporation

Annual Revenue 2021: $52.57 billion

Kuwait Petroleum Corporation is a national oil company in Kuwait. The company engages in all aspects of the oil and gas industry, including onshore and offshore exploration & production. Furthermore, the company refines, markets, and retails petrochemicals and also provides transportation services. The international operations of Kuwait Petroleum Corporation oversees the sale of around 301,000 barrels of oil products daily in Western Europe.

6. Pertamina

Annual Revenue 2021: $57.51 billion

Pertamina is an oil and natural gas company owned by the government of Indonesia. The company has six holdings that engage in several businesses, including upstream, gas, refinery, petrochemicals, trading, and integrated marine logistics. Pertamina also has sub-holdings that provide a number of products and services such as retail, air services, drilling services, training, consulting, etc.

Click to continue reading and see the 5 Biggest Private Oil Companies in the World.

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Disclosure: None. 15 Biggest Private Oil Companies in the World is originally published on Insider Monkey.

In this piece, we will take a look at the 5 Biggest Private Oil Companies in the World. For more such companies, go to the 15 Biggest Private Oil Companies in the World.

5. Petronas

Annual Revenue 2021: $59.87 billion

Petronas, also known as Petroliam Nasional Berhad, is an oil and gas corporation based in Malaysia. The company engages in the exploration, development, and production of oil & gas. In addition, the company operates refineries with a combined daily refining capacity of 700 kilo-barrels located in Terengganu, Melaka, and Johor. Petronas Gas Berhad (PGB), a subsidiary of Petronas, operates the Peninsular Gas Utilisation (PGU) system, consisting of six processing plants and over 2,500 kilometers of pipeline network to process and transport gas to the end market.

In this article, we discuss 12 diversified dividend stocks to buy now. You can skip our detailed analysis of dividend stocks and their performance over the years, and go directly to read 5 Best Diversified Dividend Stocks to Buy Now. 

Diversified companies can provide investors with diversification across different industries and sectors, which can help reduce the risk of investing in a single industry or sector. In addition to this, by having multiple businesses, companies can generate revenue from different sources, which stabilizes their revenue streams. This can be particularly beneficial in times of economic uncertainty or when one industry or sector is facing challenges. Through multiple businesses, these companies often have strong balance sheets and solid cash flow generation even during volatile times.

After recording one of its worst performances in history last year, the stock market was on the road to recovery in 2023. However, the recent Silicon Valley Bank (SVB) collapse has shaken investors’ confidence in the stock market. A monthly survey conducted by BofA through its self-compiled ‘Financial Market Risk Indicator’ after the fallout of SVB showed that investor worry levels have risen to 7.7, just a little below extreme highs of last year amid the Ukraine War. This financial instability has made investors explore different investment options, with dividend strategies gaining traction over other asset classes.

According to analysts, companies with strong cash flow should be investors’ focus as they pay stable dividends to shareholders. Chris Senyek, chief investment strategist at Wolfe Research, spoke with Barron’s about dividend stocks and the importance of cash flow. He said:

“Many dividend payers have strong balance sheets and lower leverage, and the sustainability of the dividend isn’t in question unless we get a really deep downturn.”

He further added that investors should avoid companies with a lot of debt and turn their attention toward those who are able to smoothly cover their payouts by free cash flow.

PepsiCo, Inc. (NASDAQ:PEP), Merck & Co., Inc. (NYSE:MRK), and Exxon Mobil Corporation (NYSE:XOM) are some companies that have raised their payouts for a long period of time and have strong cash flow generation. Companies like these can provide a reliable source of income and can also help to mitigate the effects of market volatility. To know more about dividend stocks, readers can have a look at 13 Best Long Term Dividend Stocks to Buy Now.

With this in mind, we will discuss the diversified dividend stocks to buy now.

Image by Sergei Tokmakov Terms.Law from Pixabay

Our Methodology:

For this list, we selected conglomerate firms that specialize in several different businesses and pay regular dividends to shareholders. We gauged hedge fund sentiment for these stocks using Insider Monkey’s database of 943 hedge funds as of Q4 2022. The list is ranked in ascending order of the number of hedge funds having stakes in the companies.

Best Diversified Dividend Stocks to Buy Now

11. Unilever PLC (NYSE:UL)

Number of Hedge Fund Holders: 22

Unilever PLC (NYSE:UL) is a British multinational consumer goods company that specializes in a wide of products. On February 13, the company declared an 8.6% hike in its quarterly dividend to $0.457 per share. The stock has a dividend yield of 3.50%, as of March 28. The company can be added to dividend portfolios alongside some of the best dividend stocks like PepsiCo, Inc. (NASDAQ:PEP), Merck & Co., Inc. (NYSE:MRK), and Exxon Mobil Corporation (NYSE:XOM).

In FY22, Unilever PLC (NYSE:UL) reported revenue of €60 billion, which showed a 14.5% growth from the same period last year. The company’s free cash flow for the year amounted to over €5.2 billion, which was sufficient to pay its dividends worth over €4.3 billion.

At the end of Q4 2022, 22 hedge funds tracked by Insider Monkey reported having stakes in Unilever PLC (NYSE:UL), up from 21 in the previous quarter. The collective value of these stakes is roughly $776.5 million.

Fundsmith mentioned Unilever PLC (NYSE:UL) in its 2022 yearly investor letter. Here is what the firm has to say:

“Last year I wrote about Unilever PLC (NYSE:UL) and attracted a virtual tsunami of comment for my remarks about Unilever, purpose and Hellmann’s mayonnaise. Events soon overtook this commentary insofar as Nelson Peltz’s Trian Partners announced that it had bought a stake in Unilever and he was invited to join the board. We are asked to suspend disbelief that this was in no way linked to the subsequent announcement that Alan Jope will be leaving the CEO role. This explanation sounds like it was lifted from the script of Miracle on 34th Street.

As I have previously pointed out, our Fund has held Unilever shares since inception and was about the 12th largest shareholder when these events happened. Yet for the first eight years of our existence as a shareholder we did not hear from Unilever. The first contact was when we were asked to vote in favour of moving the headquarters and listing to the Netherlands. As I remarked at the time, it is not a good way to manage relationships to ignore people until you need their support…” (Click here to read the full text)

10. Emerson Electric Co. (NYSE:EMR)

Number of Hedge Fund Holders: 32

Emerson Electric Co. (NYSE:EMR) is a Missouri-based manufacturing company that specializes in products and services for industrial, commercial, and consumer markets. Morgan Stanley upgraded the stock to Overweight in March and also raised its price target on the stock to $96. The firm mentioned that the company’s fundamentals are accelerating.

Emerson Electric Co. (NYSE:EMR) currently pays a quarterly dividend of $0.52 per share and has a dividend yield of 2.48%, as of March 28. It is one of the best dividend stocks on our list as it has raised dividends for 66 years in a row.

As of the close of Q4 2022, 32 hedge funds tracked by Insider Monkey owned stakes in Emerson Electric Co. (NYSE:EMR), worth roughly $781 million collectively. Among these hedge funds, Two Sigma Advisors was the company’s leading stakeholder in Q4.

9. Church & Dwight Co., Inc. (NYSE:CHD)

Number of Hedge Fund Holders: 36

A New Jersey-based multinational company, Church & Dwight Co., Inc. (NYSE:CHD) is next on our list of the best dividend stocks to buy now. The company specializes in personal care, household, and other specialty products. Deutsche Bank presented a positive stance on the consumer staples industry and raised its price target on the stock to $92 in March, while maintaining a Buy rating on the shares.

Church & Dwight Co., Inc. (NYSE:CHD) has been making regular dividend payments to shareholders for 122 years. Moreover, the company holds a 27-year streak of consistent dividend growth. It currently offers a quarterly dividend of $0.2725 per share for a dividend yield of 1.26%, as of March 28.

At the end of December 2022, 36 hedge funds tracked by Insider Monkey owned stakes in Church & Dwight Co., Inc. (NYSE:CHD), with a total value of over $1.4 billion.

8. Corning Incorporated (NYSE:GLW)

Number of Hedge Fund Holders: 39

Corning Incorporated (NYSE:GLW) is an American multinational tech company that deals in specialty glass, ceramics, and other related materials. The company also specializes in technologies including advanced optics, for industrial and scientific applications. It currently pays a quarterly dividend of $0.38 per share. The company is one of the best dividend stocks on our list as it maintains a 10-year streak of consistent dividend growth. The stock’s dividend yield on March 28 came in at 3.35%.

In March, Deutsche Bank upgraded Corning Incorporated (NYSE:GLW) to Buy and also lifted its price target on the stock to $38. The firm appreciated the company’s growing revenue in its most recent quarter.

As of the end of the December quarter of 2022, 39 hedge funds in Insider Monkey’s database reported owning stakes in Corning Incorporated (NYSE:GLW), up from 38 in the previous quarter. These stakes have a consolidated value of $348.5 million. With over 2 million shares, Citadel Investment Group was the company’s leading stakeholder in Q4.

7. Carlisle Companies Incorporated (NYSE:CSL)

Number of Hedge Fund Holders: 41

Carlisle Companies Incorporated (NYSE:CSL) is an American diversified company, based in Arizona. The company manufactures and markets a wide range of products including optical fibers and defense electronics. BMO Capital maintained an Outperform rating on the stock in March with a $335 price target, highlighting the company’s long-term performance.

Carlisle Companies Incorporated (NYSE:CSL), one of the best dividend stocks, currently pays a quarterly dividend of $0.75 per share. The company has raised its dividends consistently for the past 46 years. As of March 28, the stock has a dividend yield of 1.37%.

At the end of December 2022, 41 hedge funds in Insider Monkey’s database owned stakes in Carlisle Companies Incorporated (NYSE:CSL), worth roughly $8 billion collectively.

Madison Funds mentioned Carlisle Companies Incorporated (NYSE:CSL) in its Q4 2022 investor letter. Here is what the firm has to say:

“The bottom five detractors for the quarter were Carlisle Companies Incorporated (NYSE:CSL), Brown & Brown, Brookfield, CarMax, and Armstrong World Industries. Following robust outperformance during the first three quarters of the year, Carlisle shares took a step back this quarter as investors worried about commercial roofing demand in a potentially slowing economy.”

6. Honeywell International Inc. (NASDAQ:HON)

Number of Hedge Fund Holders: 44

Honeywell International Inc. (NASDAQ:HON) is a North Carolina-based company that specializes in a wide range of products, including alarms, building controls, medical instruments, and space systems. In 2022, the company stretched its dividend growth streak to 13 years and currently pays a quarterly dividend of $1.03 per share. The stock has a dividend yield of 2.18%, as of March 28.

In addition to Honeywell International Inc. (NASDAQ:HON), investors also pay attention to some other best dividend stocks, including PepsiCo, Inc. (NASDAQ:PEP), Merck & Co., Inc. (NYSE:MRK), and Exxon Mobil Corporation (NYSE:XOM).

As per Insider Monkey’s Q4 2022 database, 44 hedge funds owned stakes in Honeywell International Inc. (NASDAQ:HON), with a total value of roughly $698 million. Diamond Hill Capital was the company’s leading stakeholder among these hedge funds.

Click to continue reading and see 5 Best Diversified Dividend Stocks to Buy Now. 

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Disclosure. None. 12 Best Diversified Dividend Stocks to Buy Now is originally published on Insider Monkey.

In this article, we discuss 5 diversified dividend stocks to buy now. If you want to read our detailed analysis of dividend stocks and their performance over the years, go directly to read 11 Best Diversified Dividend Stocks to Buy Now. 

5. 3M Company (NYSE:MMM)

Number of Hedge Fund Holders: 52

3M Company (NYSE:MMM) is an American multinational conglomerate company that manufactures a wide range of products belonging to different industries. In January, Mizuho maintained a Neutral rating on the stock with a $120 price target, highlighting the company’s fourth-quarter earnings.

3M Company (NYSE:MMM), one of the best dividend stocks on our list, currently offers a per-share dividend of $1.50 every quarter, having raised it by 0.7% on February 7. This increase took the company’s dividend growth streak to 65 years. The stock has a dividend yield of 5.91%, as of March 28.

Of the 973 hedge funds tracked by Insider Monkey in Q4 2022, 52 funds owned stakes in 3M Company (NYSE:MMM), up from 49 in the previous quarter. The collective value of these stakes is over $1.57 billion. AQR Capital Management was one of the company’s leading stakeholders in Q4.

It’s accepted that the UK gambling industry needs to be reformed. The current 2005 Gambling Act is seen as outdated and needs to be brought into the digital age. Those who are campaigning for this have submitted replies to a parliamentary inquiry into how the UK Government are dealing with the situation.

Their responses have just been released and make for interesting reading. Many are about the risks that are associated with gambling and cannot be ignored. However, we need to look at the UK gambling industry and how the upcoming UK Government White Paper may affect profit figures.

UK online casinos will be anxious to see what that White Paper about gambling reform will include. Trying to plan for the future is not easy when you simply don’t know what regulation may be on its way with measures that could well affect your profit figures

One of the responses has come from the Betting and Gaming Council (BGC). They represent a wide range of the UK gambling industry. This includes betting shops, bingo halls, land-based casinos and online casinos and sportsbooks. They aim to “champion industry standards to ensure an enjoyable, fair and safe betting experience for all our customers.”

Their reply quotes a report published last November by EY that shows just how much the gambling industry contributes to the UK economy. It stated that £4.2 billion was contributed to the Treasury with 110,000 jobs having been created. £7.1 billion in gross value was contributed to the UK economy last year.

The UK gambling industry also helps boost tourism figures. The report put the figure at £140 million, mainly overseas visitors enjoying London casinos.

It’s also stated  that the regulating betting industry will continue to create jobs in the UK. The next five years can see 15,000 new tech jobs and 5,000 apprenticeships.

The UK Government faces some tough decisions. Introducing strict measures would undoubtedly hit company profits and most likely cause job losses rather than more being created.

That was the case when action was taken against gaming machines seen in High Street bookmakers shops. The maximum stake was reduced dramatically and the subsequent drop in revenue has led to many shops being closed and redundancies being announced.

One of the rumoured measures in the White Paper on gambling reform is to reduce the stake limits on games seen at online casinos, especially slots. How much revenue and how many jobs might be lost if that is the case?

At a time when the UK economy continues to struggle, the aim is to see it growing in the future. How do they continue to do that while taking possible action against the gambling industry that can see profits fall and jobs being lost?

The BGC admits that the UK gambling industry needs some reform. The last Gambling Act was passed 18 years ago. There have been so many changes in the industry since then with the arrival of the internet and 24/7 gambling. Their view is that any new measures should be fair and not deter gamblers who play safely to head to the unregulated black market.

That would also cause financial problems, not just for the online casinos but also for the taxman. The 2022 World Cup saw a threefold increase in the number of gamblers using such sites. The level of consumer protection is considerably lower at unregulated sites. They also do not pay tax to the UK Government so that’s more revenue lost.

The likelihood of increased regulation is worrying the gambling industry. Polish company STS Bet has recently withdrawn from the UK market and this is one of the reasons why that decision was made.

It’s not just what the UK Government has in store for the gambling industry. The UK Gambling Commission (UKGC) has been sharpening its teeth in the past year or so.

March 2023 has seen the UKGC fine 32Red Limited and Platinum Gaming Limited (who are both part of the Kindred Group) a combined total of £7.1 million. This follows several other fines including one of £17 million to Entain and one of £9.4 million to 888.

Such fines are usually being made over breaches of the rules concerning social responsibility and anti-money laundering policies. They don’t just hit the company in the pocket but their share price begins to fall too. Many shareholders will be concerned about what the future may hold for the UK gambling industry.

Meanwhile gambling companies are looking at expanding in other territories, particularly the expanding US betting industry.

Countries such as the Netherlands have already gone down that route. This month has seen some members of the affiliate sector write to the Netherlands’ House of Representatives calling for a reconsideration of the new and upcoming regulations. If the regulations introduced in the UK are equally restrictive and affect profits, then a similar response is likely here.

Energy Focus, Inc. (NASDAQ:EFOI) Q4 2022 Earnings Call Transcript March 24, 2023

Operator: Greetings and welcome to the Energy Focus, Inc. Fourth Quarter and Fiscal Year End 2022 Conference Call. Please note this conference is being recorded. I will now turn the conference over to your host, Jim Warren, Senior Vice President and General Counsel. You may begin.

Jim Warren: Thank you, operator and good morning everyone. Joining me on the call today is Lesley Matt, Chief Executive Officer. Before we begin today’s call, I’d like to remind everyone that we will make certain forward-looking statements. These statements are based upon information that represents the company’s current expectations or beliefs. The results realized may differ materially from those stated. For a discussion of these risks that could affect our results, please refer to the section of the headings risk factors as well as forward-looking statements in our most recent 10-K filed with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Also, please note that during this call and in the accompanying press releases, certain financial metrics are presented on both GAAP and non-GAAP adjusted basis. Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release, which is posted on our corporate website at energyfocus.com in the Investor Relations section of the site. I will now turn the call over to Lesley.

Lesley Matt: Thank you, Jim. Good morning everyone. Q4 was my first full quarter as CEO of Energy Focus after joining the company in mid-September, following almost 9 months of interim leadership by our Lead Independent Director, Steve Socolof. We are grateful for his hard work and dedication towards improving energy focus during his time at the helm. Steve continues to serve as a member of our Board and has been a guiding light for me on the company’s path. My main focus since joining has been helping the company return to its core, work through significant supply chain constraints in legacy inventory positions and significant cost-cutting and rightsizing to the point the company to move past its troubled operating history.

While it’s early days for me here at the company, I will be frank that our results for the past year, I will review on this call are dismal and is essentially a story of survival from which it’s my job to lead us to rebuild. I believe and our strategic investors voted with their dollars and a sign of confidence that there are calmer seas and redemption ahead. Energy Focus entered 2022 with brilliant hopes that our previous ultraviolet-C light disinfection or UVCD products will transform us into a direct-to-consumer product company and provide us with great opportunities for expansion. We have built an organization in anticipation that growth and expansion from these new products. After evaluating market demand and supply chain challenges, from our UVCD products, we revised our business strategy in 2022 to focus back on LED lighting and control products for our military, maritime and commercial and industrial lighting market with highly concentrated efforts starting in the second half of 2022.

As a result of our pivot back to military, maritime and commercial and industrial lighting and controls products, the company has taken great strides in 2022 to streamline expenses and reduce our cash burn, taking an even more aggressive approach in Q4, and we anticipate seeing full results of our efforts throughout 2023. Additionally, we have overhauled our existing inventory, reduced our operating space and restructured our workforce, which included eliminating almost 2/3 of positions. All of this had primed the team to effectively execute and focus on short-term opportunities aligned with our core channels, military maritime, commercial and industrial markets. Unfortunately, we continue to face supply chain challenges in Q4 on our best-selling products, combined with market price pressures on current inventory, which has impacted the financial results I am sharing with you today.

Despite the challenges that 2022 presented energy focus through our rigorous cost-cutting efforts, we were able to position ourselves for strategic investment by Sander Electronics in January of 2023. At the time of the investment, Jay Huang, President of Sander Electronics joined the Energy Focus Board of Directors as Chairman bringing a wealth of industry knowledge, factory sources and manufacturing experience to a well-positioned board. The funding provided by the Sander investment has contributed to approximately $4.2 million in balance sheet improvements since the start of 2023. We utilized the funding to restructure many of our debt so that we can focus our cash flow back on day-to-day operations and not previous obligations. Some of these activities include a pay-down of $1 million in conjunction with a restructuring of our secured inventory line through Crossroads Financial that will reduce our overall cost of this facility in 2023.

A pay-down of $500,000 in restructuring of a payment schedule with our outstanding bridge note held by Streeterville Financial that will better align the timing of the cash burn with what we anticipate to be increased cash flows from sales later in 2023, an agreed termination on our accounts receivables lending facility, conversion of promissory notes totaling $1.5 million to common stock reducing future cash burn. In addition to the financial improvement, Jay and the Sander Electronic team has been instrumental in addressing the supply chain problems that hobbled Energy Focus in 2022. I am beyond excited to report that we have sourced new vendors, placed orders with tentative ship dates and inventory is anticipated for second quarter of this year.

Photo by Callum Hill on Unsplash

Finally, orders for our popular RedCap emergency lighting products continues to build a healthy backlog that was not realized in 2022 because of sourcing challenges. However, we anticipate resuming shipping RedCap to help fill this backlog even before the close of Q2. Our in-focused power line control products continue to gain interest as more customers are educated around this innovative power line control technology as we round out the product offering. We look to improve and expand our in-focus power line control product portfolio so that customers can realize all of the wellness benefits of human-centric lighting while being cost conscious in their retrofit efforts. In my time at Energy Focus, in focus has received positive feedback from current customer installations, and I’m looking forward to expanding sales in this category in 2023.

Staying on the theme of a steady and increased demand, I’m pleased to report that the strategic hire that we made in May of 2022 to service our government sales channel continues to build a strong backlog of orders for the military maritime market. Prior to this hire, our military sales pipeline as we entered 2022 was swindling and keep in mind that these are long lead time made-to-order sales. Our new government sales lead immediately went to work shoring up the sales pipeline and continue to drive booked orders. Although supply chain constraints in Q4 of 2022 prevented the company from fully realizing his efforts in the year-end results with some of the orders slipping into the first quarter of 2023, we have resolved these log jams and look forward to sharing what we anticipate being strong sales numbers in this channel in 2023.

As a company, we are also looking at other products that we can offer this channel to increase our percentage of winning bids. The Sander investment has also allowed for Energy Focus to think beyond the constraints of lighting products and carefully expand into other energy solution products categories that appropriately align with our current markets and sales channels. In early 2023, we announced our expansion into gallium nitride or more commonly referred to as GaN power supplies. These are power supplies for LED lamps, luminaires and displays that well align with our core business and Sanders’ expertise. We believe that working together we will be able to expand our offering to include components and end products in energy-related fields.

Our joint technical cooperation and development will allow us to pursue expected opportunities in the fields of energy conservation, energy storage and energy management systems. Initially, we plan to offer these items to the lighting industry and tap into our combined team’s experience in LED lighting design, manufacturing and sales. Compared to legacy silicon-based power electronics, our GaN power supply products are expected to be more compact in size with higher efficiency and produce less heat from operations. We are also looking at many other what we refer to as energy solution products to expand our portfolio and sales potential. Although it is premature to release all of the details today, I am personally excited as I look the prospective expansion plans for Energy Focus.

With a promise towards the future, let me now review our financial performance for the quarter and the year. Net sales of $663,000 for the fourth quarter of 2022 decreased 72.4% compared to sales of $2.4 million in the fourth quarter of 2021, driven mainly by a decrease in military sales. Both commercial and military sales were heavily impacted by supply chain constraints, and the military channel also suffered from a weak sales pipeline early in the year prior to our strategic hire. When compared to $1.8 million in the third quarter of 2022, sequential net sales were primarily down due to a decrease in commercial product sales. Net sales of our commercial products were $349,000 or 52.7% of total net sales for the fourth quarter of 2022, a decrease as compared to net sales of $1.2 million or 48.6% of total net sales for the fourth quarter of 2021, reflecting our supply chain constraints and the continued long-term impacts of the COVID-19 pandemic due to fluctuations in the timing, pace and size of commercial projects.

Sales of our military products decreased in fourth quarter, mainly due to the supply chain impacts as well as continued delays of government funding available for certain projects and the continued delay timing of orders. Gross loss for the fourth quarter of 2022 was $0.2 million compared with gross profit of $0.2 million in the fourth quarter of 2021, a decrease of 200% year-over-year. Recall that in 2021, we recorded a $0.9 million for the employee retention tax credits as well, though we continue to wait to receive half of those funds. As a percentage of revenue, gross profit margin was a negative 35.9% in the fourth quarter of 2022 compared to 7.9% in the fourth quarter of 2021. The year-over-year decline in gross margin was primarily driven by higher variable costs as we sold down inventory on hand.

Variable costs increased 57% as compared to the fourth quarter of 2021 to 123%. Adjusting gross profit margins for excess and obsolete in-transit net realizable value inventory reserve resulted in the non-GAAP adjusted gross margins of negative 55.8% for the fourth quarter of 2022 compared to 14.7% in the fourth quarter of 2021 and 3.2% in the third quarter of 2022. Gross margin was heavily depressed by the impact of fixed costs on low sales levels as well as our inventory reduction program, including sell-through pricing, scrap and liquidation activity and excess and obsolete reserve activity. Based on our levels of fixed costs, if we can again obtain quarterly sales levels greater than $3.5 million, we continue to expect our overall gross margins to be in the mid-20s.

As we move forward on these run rates, we anticipate we will begin to approach the high 20s percentage range as we introduce new products and implement more aggressive value-added and value engineering initiatives to accompany our increased sales volume as well as depending on our sales mix and inventory valuations. However, we will continue to see some fluctuations quarter-to-quarter. Operating expenses in the fourth quarter of 2022 were $1.8 million or 269.4% of sales compared to $2.5 million or 105.8% of sales in the fourth quarter of 2021. The decrease is attributable to reduction in payroll and payroll-related expenses due to our realignment initiatives over the past year as well as decreased advertising and promotion costs. Sequentially, operating expenses decreased approximately $458,000 from the $2.2 million in the third quarter of 2022, reflecting lower product development and SG&A expense as the company entered its current strategic initiatives.

Loss from operations for the fourth quarter of 2022 was $2 million compared to an operating loss of $2.4 million in the fourth quarter of 2021. Sequentially, this compares to a loss from operations of $2.4 million in the third quarter of 2022, an improvement of $383,000. Net loss was $2.3 million or $0.24 per basic and diluted share of common stock for the fourth quarter of 2022 compared with net loss of $2.6 million or $0.50 per basic and diluted share of common stock in the fourth quarter of 2021. Sequentially, this compares with a net loss of $2.7 million or $0.29 per basic and diluted share of common stock in the third quarter of 2022. Adjusted EBITDA, a non-GAAP measure, which excludes depreciation and amortization, interest expense, stock-based and other non-recurring charges and/or sources of income such as incentive compensation and impairment charges taken against fixed assets was a loss of $1.8 million for the fourth quarter of 2022 compared with a loss of $2.2 million in the fourth quarter of 2021 and a loss of $2.3 million in the third quarter of 2022.

Adjusted EBITDA improved from the prior year despite lower sales due to significant cost-cutting initiatives in SG&A. For the full year, net sales were $6 million for 2022 compared with $9.9 million for 2021. Net sales from commercial products were $3.7 million or 62.8% of total sales for 2022 compared with $4.6 million or 47.5% of total net sales for 2021. Net sales from military and maritime market products were $2.2 million or 37.2% of total net sales for 2022 compared with $5.2 million or 52.5% of total net sales for 2021. Gross loss was $0.3 million or negative 5.3% of net sales for 2022 compared with gross profit of $1.7 million or 17.2% of net sales for 2021. Gross margin for 2022 included unfavorable price and usage variances for materials and labor of $0.7 million or 29% of net sales and unfavorable inventory and want to reserve adjustments of $0.5 million or 8.7% of net sales.

Adjusted gross margin was negative 4.8% for full year 2022 compared to 18.8% in the prior year due to higher variable costs from selling higher priced inventory on hand. We reviewed all fixed assets and identified any that were disposed or carried a reduced fair value, the recognized loss better position the company to reflect current value and focus on future growth. Operating loss was $9.3 million for 2022 compared with an operating loss of $8.7 million for 2021. And net loss was $10.3 million or $1.27 per basic and diluted share of common stock for 2022. This compares with net loss of $7.9 million or $1.73 per basic and diluted share of common stock for 2022, inclusive of non-cash pretax gains of $1.7 million from the forgiveness of our Paycheck Protection Program loan and other income recorded relating to the employee retention tax credit.

Adjusted EBITDA with a loss of $8.7 million for 2022 compared with a loss of $7.9 million for 2021. The increased adjusted EBITDA loss in 2022 as compared to 2021 was primarily due to gross margin reductions from lower sales and higher cost of goods sold. Now I’d like to turn to the balance sheet. Cash was $52,000 as of December 31, 2022, as compared to $2.7 million as of December 31, 2021. As of December 31, 2022, the company had total availability of $107,000, which consisted of $52,000 of cash and $55,000 of additional borrowing availability under its credit facilities. This compares to total availability of $4.4 million as of December 31, 2021. Recall, we had just completed an equity raise at the end of December of 2021 as reflected in our cash and availability balances.

As a reminder, total availability is a non-GAAP measurement of our access to cash at any given point in time, and we believe is a much more relevant metric than simply looking at the cash balance or even the net debt on the balance sheet. Excess borrowing availability on our credit facilities represents the difference between the maximum borrowing capacity of the credit facilities and our actual borrowings under these credit facilities. The excess availability under our credit facilities was $55,000 at the end of the fourth quarter 2022 and $169,000 at the end of the third quarter 2022 and $1.7 million at the end of the fourth quarter 2021. During the fourth quarter of 2022, cash used in operations was $472,000, of which a net loss from operations used $2.3 million of cash but that was offset by a source of cash attributable to working capital of $1.6 million, while cash used in investing activities was $16,000 and the company generated $4.1 million in cash from financing activities.

Our net inventory balance of $5.5 million as of December 31, 2022, decreased $2.4 million over December 31, 2021. With that, we would like to open the call to questions.

See also 15 Best High Yield Dividend Stocks to Buy and 15 Most Promising Stocks to Buy According to Analysts.

Q&A Session

Operator: Thank you. Our first question comes from the line of Sameer Joshi with H.C. Wainwright. Please proceed with your question.

Sameer Joshi: Thanks. Good morning, guys. Thanks for taking my questions. In terms of the recovery of top line returning to previous levels, should we expect 2023 to revert to, say, 2021 levels or could you reach the 2020 level reached in excess of $15 million?

Lesley Matt: Thank you for your question, Sameer. My expectation is to at least reach the 2021 models, if not exceed.

Sameer Joshi: Okay, okay. Okay. And then in terms of the distribution between commercial versus military, I know you provided commentary on military backlog or at least pipeline expanding. How should we look at the mix going forward during the rest of the year from €“ and contribution from military over the year?

Lesley Matt: Thank you. Yes, we have attributed a large backlog as we headed into 2023. And I anticipate our mix to be around 50-50 as we continue throughout the year with a larger amount in Q1 because of that slippage that we reported in Q4 of €˜22.

Sameer Joshi: Yes. And are the margins €“ how is the margin profile? And will you just give us a high level on the type of products that are going to commercial versus military and the margin differences there?

Lesley Matt: Yes. So, there are large margin differences between our commercial and our military products. Through our cost reduction efforts, we are hopeful to improve our margin levels on both commercial and military lines as we move forward throughout 2023. And our partners, Sander Electronics are helping us improve those margin levels, which we hope to report in future quarters.

Sameer Joshi: Got it. And just on the EnFocus module, I think it was being rollout in the last quarter €“ in 4Q I mean and product launch was expected around the end of last year. Is that rollout to €“ is that rollout underway for the EnFocus module?

Lesley Matt: Yes. Unfortunately, our EnFocus rollouts were delayed due to some supply chain challenges in 2022 and beginning €“ at the start of this year as well. We are hopeful to resume those activities and launch those products in 2023.

Sameer Joshi: Okay. And on the €“ just going back to the military, how should we €“ like what is the visibility, meaning these are long lead time revenues. But how much visibility do you have like 1-year out, 2-year out, how should we think about it?

Lesley Matt: Great question. As we look at military sales, we €“ historically, we started to build our pipeline and backlog on military two quarters to three quarters out before those sales are due to the military. So, we have been rebuilding throughout the end of €˜22 into the beginning of €˜23, a significant portion of military pipeline that we will realize here in 2023.

Sameer Joshi: Understood. And just a couple of questions on operating expenses and inventory levels actually. Is the inventory that you have mostly mark-to-market in terms of what you expect from sales, or should we expect negative gross margins from this going forward at least in the next few quarters?

OppFi Inc. (NYSE:OPFI) Q4 2022 Earnings Call Transcript March 25, 2023

Operator: Good afternoon and welcome to OppFi’s Fourth Quarter 2022 Earnings Conference Call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded. And it is now my pleasure to introduce your host, Shaun Smolarz, Head of Investor Relations. Thank you, sir. You may begin.

Shaun Smolarz: Thank you, operator. Good afternoon. On today’s call are Todd Schwartz, Chief Executive Officer and Executive Chairman, and Pam Johnson, Chief Financial Officer. Our fourth quarter 2022 earnings press release and supplemental presentation can be found at investors.oppfi.com. During this call, OppFi will discuss certain forward-looking information. These forward-looking statements are based on assumptions and assessments made by OppFi’s management in light of their experience and assessment of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. Any forward-looking statements made during this call are made as of today and OppFi undertakes no duty to update or revise any such statement, whether as a result of new information, future events or otherwise.

Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the company’s filings with the Securities and Exchange Commission, including the sections entitled Risk Factors. In today’s remarks by management, the company will discuss certain non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in the earnings press release issued earlier this afternoon. This call is being webcast live and will be available for replay on our website. I would now like to turn the call over to Todd Schwartz.

Todd Schwartz: Thanks, Shaun and good afternoon everyone. We’re excited to begin 2023, and we believe our business continues to stabilize and strengthen. As founder of OppFi, I returned as CEO a year ago and immediately took steps to enhance our leadership team as well as talent in key roles throughout the company. While the macro environment in 2022 was challenging in many ways, we persevered with resiliency, focus, and a relentless emphasis on improvement. As a result, despite significant economic headwinds, including a 40-year peak in inflation, we delivered record net originations, total revenue, and ending receivables for the full year. As a result, we achieved our eighth consecutive year of profitability, exceeding our profitability guidance for 2022.

Although, challenging at the time, we embraced the learnings from 2022 as they provide a distinctive competitive advantage. We believe that embedding these learnings into our operating processes going forward enhance our ability to deliver a stable, profitable platform across economic cycles. We are optimistic about 2023, while remaining mindful of the continuation of an uncertain macroeconomic environment. The experiences of 2022, coupled with our 10-year business history, give us the confidence that we can control our success by balancing originations growth, overall risk, and expenses. Pam will review our fourth quarter and full year results in detail, as well as discuss guidance for Q1 and full year 2023. Before she does, I will cover four topics.

One, some highlights from our Q4 and full year 2022 financial performance; two, an update on strategic business initiatives for 2023; three, our macroeconomic outlook and quarter to date business trends; and four, our long-term growth strategy. Our fourth quarter results were driven by credit performance and operational leverage through expense reductions. This enabled us to beat the top end of our full year guidance for adjusted net income. The key highlights for the full year compared to the previous year included 27% growth in net originations to $758 million, 19% growth in ending receivables to $403 million, 29% growth in total revenue to $453 million, net income of $3.3 million and adjusted net income of $5 million. We also successfully improved our marketing and operating cost efficiencies in 2022 as demonstrated by the 20% decrease in marketing cost per new funded loan and a 13% improvement in operating expenses as a percentage of total revenue, excluding interest expense, add-backs, and one-times.

In addition, our net promoter score, or NPS, was 82 for 2022. We believe that maintaining an 80 plus NPS score demonstrates the value and quality of OppFi’s platform in different operating environments, and even more so, when there are elevated charge-offs and challenging macro conditions. Turning to our fourth quarter summary. On a year over year basis, total revenue increased by 25% to $120 million. Net loss was $5.2 million and adjusted net loss was $2.8 million. Our improved efficiency trends continued in the fourth quarter with a 25% decrease in marketing cost per new funded loan and a 23% improvement in operating expenses as a percentage of total revenue, excluding interest expense, add-backs, and one-times. One of the other highlights in the fourth quarter was the closing of $150 million credit facility with Castlelake.

The addition of Castlelake to our existing stable of funding sources has already helped fuel profitable growth and demonstrates that OppFi can continue to attract funding even in challenging market conditions. We’re excited to have a new financial partner and look forward to continuing to grow with them. Now, I’d like to provide progress updates on some of our core strategic initiatives that we expect to drive our 2023 financial performance. Last year, the most significant adjustments to credit models were made in the company’s history. In the fourth quarter, the first payment default rate continued to improve, which we think bodes well for performance later in 2023. The vintage level metric is generally a leading indicator for the net charge-off rate.

In the fourth quarter, the first payment default rate for new customers continued to move closer to pre-pandemic levels, having been down 29% from the second quarter before credit adjustments were made. For existing customers on refinanced loans, the first payment default rate was down 11% from the second quarter. In the fourth quarter, delinquency rates across the portfolio began to improve. The total past-due rate decreased 7% from the end of the third quarter, and we have experienced further improvement so far in the first quarter. These improvements provide us with the confidence that the net charge-off rate will improve later this year as better performing new and refinanced loans comprise a larger mix of the portfolio and older non-performing loans cycle out.

Photo by Blake Wisz on Unsplash

Focus remains on continuous improvement to credit models, specifically by utilizing technology, data sources, and additional attributes to enhance the accuracy and manage risk for the underwriting platform. This year, we are also very focused on enhancing our platform differentiation. Key marketing initiatives include exploring new partners and channels, improving search engine optimization, as well as making direct mail and email more compelling and efficient. We’re also working towards building upon our 66% increase in referrals that we experienced last year. From a product perspective, we are continuing to introduce and communicate to customers new features such as same-day funding in collaboration with our bank partners as well as enhancements to our self-service payment portal.

Our renewed values-based collection strategy continues to be accretive to our business, yielding increased payments and lowering our net charge-off rate. Additionally, recoveries of previously charged-off loan balances grew by 26% year over year. We expect this area to further contribute to our earnings rebound this year. 2022 was a strong year from an expense leverage perspective as revenue growth substantially outpaced operating expenses. This year, we remain focused on realizing more expense efficiencies by focusing on technology and operational initiatives. I’d now like to spend a couple of minutes discussing our current macroeconomic view as well as some current business trends for the first quarter. We’re encouraged by recent economic reports indicating that inflation is decelerating and that for some categories such as used vehicles, prices are falling.

The employment market continues to be strong as the overall unemployment rate remains low at 3.6%. These trends are helpful for middle class consumers, which is our addressable market. Pam will detail our Q1 and full year 2023 guidance; however, I will say that we are encouraged by our quarter-to-date trends, which we think set us up nicely for a significant rebound in full year adjusted net income. With that said, we expect profitability to be skewed to the second half of the year as Q2 will be partially impacted by loan vintages from last year before credit adjustments were made. Now, I’d like to take a step back and provide an update on our long-term growth strategy to accelerate profitable growth. In addition to our plans to drive core product volume growth and expand our partnerships to serve more consumers, we are expanding our focus on corporate development.

In our view, this is the best way for us to diversify the business. During our 10-year history, OppFi has generated significant brand equity across a core set of attributes, credit access and choice, transparency, value, and market leading customer experience driven by technological innovation. We believe these same attributes would have significant synergy and create incremental value with platforms or assets in adjacent customer or product categories. We think by bringing such platforms or assets under the OppFi umbrella, we could drive scale and diversification in a manner that strategically leverages our core competencies. For investors, our long term goal is to deliver sustainable earnings per share growth that is consistently among the highest in our industry.

We are confident that we are on the right path to achieving this vision. Before I turn it over to Pam, I want to reiterate that we are optimistic about 2023, given continued strong origination demand and improved credit performance. With our positive outlook and confidence in the business, my family and I purchased OppFi’s shares in the open market during the fourth quarter open trading window. We intend to continue purchasing shares in the open trading windows when we believe the market price does not reflect its long-term intrinsic value. With that, I will turn the call over to Pam.

Pam Johnson: Thanks Todd and good afternoon everyone. We are very pleased to have achieved our eighth consecutive year of profitability with record net originations, total revenue, and ending receivables. In addition, we exceeded all of our full year 2022 guidance metrics that we reiterated in our third quarter earnings release: total revenue, operating expenses as a percentage of total revenue, excluding interest expense, add-backs and one-time items; and adjusted profitability. For 2022, adjusted net income was $5 million, resulting in adjusted earnings per share of $0.06. Total revenue increased 29% to $453 million, while net originations were up 27% year over year to $758 million, driving a 19% increase in ending receivables to $403 million.

Adjusted EBITDA was $54 million. For the fourth quarter, total revenue increased 25.1% to $120 million, despite our net originations of $187 million, which was the same as the year ago period. This reflects the credit adjustments made in the third quarter. From a mix perspective, in the fourth quarter, approximately 54% of originations were to existing customers for refinanced loans. On an absolute basis, new customer loan originations for the quarter decreased by 10% year over year due in part to the credit adjustments implemented in the third quarter, while existing customer loan originations increased by 10%. We are very pleased that new originations for the lowest credit risk tier increased by 328% year over year. We accomplished this with strategic marketing initiatives, including adjusted our filter criteria with key digital marketing partners, as well as moving upmarket with our direct mail campaign.

Our annualized net charge-off rate as percentage of average receivables was 71% for the fourth quarter of 2022, compared to 53.2% for the prior year quarter. As a percentage of revenue, the annualized net charge-off rate was 59.8%, compared to 43.2% last year. Given the steadily improving early delinquency rate performance at the vintage and portfolio levels, we believe that the net charge-off rate peaked in the fourth quarter and will begin to improve with our first quarter results this year. Turning to expenses, operating expenses for the fourth quarter, excluding interest expense, add-backs, and one-time items, totaled $42.2 million or 35.1% of total revenue, compared to $43.9 million or 45.8% of revenue for the fourth quarter of 2021. The year over year decrease was primarily driven by lower direct marketing spend due to lower cost per funded loan and increased efficiencies through headcount reduction.

Adjusted EBITDA totaled $9.9 million for the fourth quarter, compared to $20.4 million in the prior year quarter, as higher revenues and relatively lower expenses were more than offset by increased net charge-offs. Interest expense for the fourth quarter totaled $10.7 million or 8.9% of total revenue, compared to $6.9 million or 7.1% of total revenue in the same period a year ago. The year over year increase was due to higher interest rates on our credit facilities utilized to fund originations growth. Adjusted net loss was $2.8 million for the fourth quarter, compared to adjusted net income of $11.4 million for the comparable period last year. This loss was smaller than anticipated by our full year guidance due to the credit performance. For the three months ended December 31, 2022, OppFi had 14.6 million weighted average diluted shares outstanding.

Since this period resulted in an adjusted loss, the basic and diluted share counts were the same as they both exclude dilutive securities. Adjusted net loss for the fourth quarter was $0.19 per share. As a reminder, our shares of Class B common stock that are exchangeable into shares of Class A common stock as a result of our Up-C structure are excluded from the diluted shares calculation in any period in which OppFi reports a loss because the inclusion would be anti-dilutive. Our balance sheet remains healthy with cash, cash equivalents, and restricted cash of $49.6 million, total debt of $347.1 million, gross receivables of $457.3 million, and equity of $159.1 million as of quarter end. We believe we have ample liquidity available to support our future growth plans with $532.2 million in total funding capacity at the end of 2022.

During the fourth quarter, OppFi did not have any activity under its share repurchase authorization. For the year, the company repurchased approximately 704,000 shares for $2.4 million at an average price of $3.47 per share. Turning now to our outlook. For full year 2023, we are providing guidance for total revenue of $500 million to $520 million, which implies growth of 10% to 15% year over year. We expect adjusted net income of $22 million to $28 million. Based on an anticipated diluted weighted average share count of 84.3 million, adjusted diluted earnings per share would be between $0.26 and $0.33. For the first quarter, we expect to be approximately breakeven on an adjusted basis. Quarter to date, we have managed the business to tighter balance of growth and risk.

In addition, we expect our net charge-off rate to improve sequentially from the fourth quarter, while remaining elevated. The net charge-off rate remains elevated due to the dynamic of poor performing loans cycling out of the portfolio and our conservative approach to growth at the beginning of the year. Beginning in the second quarter, we expect to return to quarterly profitability with a gradual acceleration during the remainder of the year as credit continues to strengthen based on adjustments made last year and a customer mix that is shifting to our lowest risk tiers. The improvements in the first payment default rate and total portfolio delinquency rate provide us confidence that the net charge-off rate will decrease as the year progresses.

With that, we would now like to turn the call over to the operator for Q&A. Operator?

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Q&A Session

Operator: Thank you. And the first question comes from the line of Mike Grondahl with Northland Securities. Please proceed with your question.

Mike Grondahl: Hey, thanks, guys. The first question, could you just talk about the yield environment that you’re seeing? And are you seeing any compression there? And then secondly, just what’s the one or two main attributes that you’re seeing that gives you some comfort that charge-offs peaked in 4Q?

Todd Schwartz: Yes, good question. Just to clarify, though, when you say yield compression, can you be more specific. So I answer your question correctly.

Mike Grondahl: Yes, I mean, I guess, I’m just saying what are the yields you’re offering in the market? And have you had to lower those or are those compressing at all? I mean, I don’t know that they are, but that’s what I’m asking.

Todd Schwartz: Yes, pricing. So the answer is no. There is been some favorability there. I think Pam had mentioned this that we are we are currently, on behalf of the bank partners, originating the highest percentage of low-risk customers that we’ve seen. Part of this is macroeconomic situation that’s going on in the country, where we’re seeing significant tightening still going on above us. Then obviously, with the banks right now, that’s going to exacerbate it. But also due to our marketing team and our funneling, we’ve been able to find new pockets and be able to go after growth in those areas. So it’s a little €“ it’s a attribution of it, it’s a little bit of both.

Mike Grondahl: Got it. And then I guess, the one or two attributes you’re seeing, that make you believe net charge-offs have peaked.

Todd Schwartz: Well, listen, I think there is uncertainty in the macroeconomic environment for different swaths of customers, in particular, it’s our customer. I said it many a times last year, spike high inflation is probably the most painful for our customers, which peaked in in last year, and we think it peaked in Q4. We usually kind of €“ the way we look at things is when loans are originated, usually 6 months after is kind of when we would see the spike in charge-offs. But for our customers specifically, we’ve seen significant improvement. Customers that we lend to, the middle-income consumers, they have changed their behaviors. We’re pretty sure of it. They have been able to adapt to the high price environment. And when things changed, they were kind of in shock and people had to adjust their lifestyles.

But what’s happened now is, people have done that, and we’ve been able to see significant improvement in our FPD rates and total DQ rate. Also, the other thing I’ll say is unemployment, right? So unemployment remaining low has been very beneficial for our customers. Our customers are gainfully employed. And then that has been something that we kind of forecasted to tick up. And I think everyone is surprised with how unemployment has stayed so low.

Mike Grondahl: Got it. And maybe I’ll just ask one more. But historically, I thought your collection strategy was pretty hands off, and it sounds like you’re kind of leaning into collections a little bit. You said something about recoveries were being up 26% year-over-year. One, could you just kind of describe that collection strategy and two, what’s the dollar amount associated with up 26% like, what were recoveries last year and this year?

Express, Inc. (NYSE:EXPR) Q4 2022 Earnings Call Transcript March 24, 2023

Operator: Ladies and gentlemen, good morning. My name is Abbei, and I’ll be your conference operator today. I’d like to welcome everyone to the Express Incorporated Conference Call to discuss Fourth Quarter and Full Year 2022 Earnings. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. And I now like to hand the call over to Greg Johnson, Vice President of Investor Relations. Please go ahead, sir.

Greg Johnson: Thank you, operator. Good morning, and welcome to the Express earnings conference call and webcast to discuss the announcement of our fourth quarter and full year 2022 results. Express’ fourth quarter and full year 2022 earnings release and presentation can be found in the investor relations section of express.com. These items will be archived and our call will be available for replay. I’d like to open by reminding you of the company’s Safe Harbor provisions. Today’s call may contain forward-looking statements. Any statements made during this conference call, except those containing historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual future results may differ materially from those suggested in forward-looking statements due to a number of risks and uncertainties. For a description of the risk that could cause our results to differ materially from those described in forward-looking statements, please refer to our 2021 Form 10-K and other filings with the SEC. These risks and uncertainties are further detailed in our earnings press release that we issued this morning. These statements represent our current judgment and are subject to risks, assumptions, and uncertainties. Express assumes no obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law. In addition, we may refer to certain non-GAAP measures.

You can locate a reconciliation of any non-GAAP measures discussed in our comments to amounts reported under GAAP in our earnings release. We will also be providing financial comparisons to prior fiscal periods and our prepared remarks today refer to comparisons to the corresponding period in 2021 unless otherwise noted. Please see the explanatory note in the earnings release for additional details regarding the definition of certain items. With me today are Tim Baxter, Chief Executive Officer; Matt Moellering, President and Chief Operating Officer; and Jason Judd, Chief Financial Officer. I will now turn the call over to Tim.

Tim Baxter: Thank you, Greg and good morning, everyone. We delivered full year 2022 diluted earnings per share of $4.25 after completing the transaction with WHP Global. This transformative strategic partnership begins a bold new chapter for our company. As a part of the transaction and reflecting the intellectual property of the Express brand that we contributed to the joint venture and to the private sale of a pipe investment, which WHP Global used to acquire 5.4 million newly issued shares of our common stock, we received proceeds of $260 million, which repositioned our company financially, and we are now beginning to reposition our company strategically. We intend to first achieve profitable growth in our core Express business.

Second, to optimize our fully integrated omnichannel platform to create synergies and drive efficiencies across a portfolio of brands. And third, to accelerate our growth and profitability in partnership with WHP Global by scaling the Express brand through category and international licensing, and by acquiring and operating other fashion brands. We will accomplish these objectives by operating with consistent, rigorous, sustainable financial discipline, and we are fully committed to creating shareholder value. Our comparable sales were flat for the year, with negative comps in the back half offsetting gains in the first half. Our strategy to elevate our brand with higher average unit retails and reduced storewide and sitewide promotions, which had driven steady growth for five consecutive quarters through Q2, bumped up against reduced consumer spending, increased price sensitivity in discretionary categories and aggressive promotional activity across the industry.

In addition to these external headwinds, we had some self-inflicted misses in our women’s assortment architecture. We lacked depth and breadth across certain categories and products. We were out of balance in dressy versus casual, in core versus fashion, and in good, better, best pricing. Over the last three years, our ability to react quickly has been inhibited by the industry’s supply chain challenges. Now that we have effectively mitigated most of those challenges, our receipts are arriving on time or in some cases earlier than expected, and we are responding to consumer trends in behavior with greater speed. We recalibrated with urgency to address the imbalances in our assortment architecture late in the third quarter. We have chased, restructured, and corrected our core assortments, and these categories are already generating a significantly higher portion of our sales.

These recalibrations will accelerate as we move through the spring and be fully realized in Q3. Our outlook for 2023 reflects improved sales trends as we move through the year. In 2022, we continued to advance the EXPRESSway forward strategy, and while our women’s business was challenged, our men’s business delivered a record year. We drove positive comps of 12% and growth in all major categories. Our brand purpose is resonating, and our styling community is growing. We are operating with the highest number of loyalty members in our company’s history and see strong spend per customer, but fell short of our customer acquisition targets and are adjusting our marketing strategies to address this. Turning to performance by sales channel. Our retail and outlet stores outpaced eCommerce throughout the year.

Express factory outlets performed well with a positive 4% comp and record sales and profit in 2022. These results further underscore the current consumer expectation around value. Retail stores delivered a 5% comp for the year, with our in real life pilot stores outperforming the balance of our fleet. We open six new Express Edit concept stores in New York, Miami, Boston, and Philadelphia. Our Express Edit stores are requiring new customers and loyalty members and outperforming the balance of our fleet on these metrics, as well as boosting digital sales and surrounding zip codes. Our eCommerce business slowed significantly as the year progressed as customers returned to shopping in our stores. eCommerce sales were also impacted by the challenges in our women’s business, which is highly penetrated online.

As the women’s business has improved, we’ve seen a corresponding lift in this channel. We remain committed to delivering a billion dollars in eCommerce demand, but given the industry-wide slowdown in online sales, this may take more time than we originally anticipated. The macro conditions in the back half of 2022 were challenging, and because we expect these conditions to continue, we have identified $40 million of annualized expense savings. $30 million will come from reductions in our SG&A cost structure. The remaining $10 million comes from interest savings due to the elimination of our high interest term loan, which we paid off in January. We expect inflationary headwinds as well. So, this is just the first phase of aggressive, productive cost savings and expense reductions in order to safeguard our commitment to achieve a mid single digit operating margin.

At an upcoming investor event, we will share more detail about our expected cost savings and expense reductions, including how and when they will be realized. We are fully committed to the EXPRESSway forward strategy, and our teams remain focused on the initiatives advancing our objectives. We have been agile in our approach and continue to both respond to and navigate the macroeconomic consumer and competitive environments. We remain confident in our stated goal of long-term profitable growth in the Express brand. Now, let me turn to the other aspects of our transformation beyond our core Express business. We intend to fully optimize our integrated omnichannel platform to operate and grow a portfolio of fashion brands. We will leverage our streamlined, flexible, go-to-market model and apply our capabilities in sourcing and production, logistics, real estate, technology, finance, and human resources to create synergies and drive efficiencies across the portfolio.

Pixabay/Public Domain

We also intend to accelerate our growth and profitability in partnership with WHP Global by scaling the Express brand through category expansion and international licensing and by acquiring and operating other fashion brands. We will be disciplined in our approach to acquisitions, with a focus on generating compelling returns on our investments and delivering against a clear set of strategic criteria, including profitable growth potential, synergies through our operating platform and new capabilities. Already a part of the Express brand portfolio, UpWest will also accelerate our growth. While still small, UpWest had a great year with sales growth of 43%. Digital sales continue to grow rapidly, and we have expanded the brick and mortar fleet to a total of 13 stores.

UpWest also successfully launched its first wholesale relationship with Nordstrom in 2022. Now let me turn the call over to Jason, who will take you through additional aspects of the WHP Global partnership, as well as the detail of our fourth quarter and full year results and provide our outlook for 2023.

Jason Judd: Thank you, Tim and good morning, everyone. Before I review our core Express business results for Q4 and the full year, let me speak briefly about the transaction we closed in January with WHP Global. As Tim said, this is a transformative partnership which repositioned our company financially. Upon closing, we received $235 million in gross proceeds in exchange for contributing intellectual property assets to the joint venture. We also received $25 million in proceeds from the private sale of a pipe investment, which WHP Global used to acquire 5.4 million newly issued shares of our common stock, representing an approximate pro forma ownership of 7.4%. The $260 million in proceeds immediately strengthened our balance sheet and provided us with capital to repay our $90 million term loan, eliminating $10 million in annual interest expense and fund the first year guaranteed minimum royalties of $60 million to the IP joint venture.

We will use the balance of the proceeds to invest in the EXPR platform and in future M&A opportunities. We are beginning the next phase of our company’s transformation to create shareholder value. And the most important way we will do this is by achieving sustainable, profitable growth in the Express brand. In order to realize the object to reimagine our financial architecture in some significant ways, growing the top line, operating with financial discipline and realizing expense savings. In 2023, we intend to deliver $40 million of expense reductions to offset the $40 million of net royalty paid to the IP joint venture. $10 million will come from the interest expense savings I just mentioned, and the remaining $30 million will come from reductions to our SG&A expenses.

Moving to our results. We delivered full year 2022 comparable sales, gross margin rate, SG&A expenses as a percent of sales and adjusted diluted loss per share, all within the ranges of our previous outlook. We expected and drove flat comparable sales in 2022 despite negative 13% comps in Q4. We expected and realized a 150 basis point decline in our full year gross margin rate, including our Q4 gross margin rate of 23.9%. We expected our 2022 SG&A expenses as a percent of sales to delever approximately 200 basis points, and we actualized at 220 basis points. Our full year GAAP diluted earnings per share was $4.25. This includes the after tax impact of the $409 million gain on the transaction with WHP Global. We expected an adjusted diluted loss per share of $1.18 to $1.22 in 2022.

And after adjustments, we actualized at a loss of $1.21 per share. Moving on to the balance sheet. We expected our inventory to decline sequentially and move closer to parody with quarterly sales changes. Our inventory was up 2%, which was a meaningful improvement from the 10% increase in Q3. As we moved through the month of January, our inventory levels were down 6%. However, we received $26 million of fresh product in the back half of January, which was earlier than expected due to improved supply chain conditions, and we began to see improved results immediately upon receipt of that product, particularly in women’s. Our balance sheet at the end of the year includes the $52 million CARES Act receivable we have mentioned before, and which we expect to receive in 2023.

Borrowings against our asset based lending facility at year-end were $122 million, and we had $66 million of cash and cash equivalent on hand and $148 million available on the revolver. Turning to our outlook for 2023. We considered our 2022 performance as well as the advancements we have made in our four foundational pillars and balanced those factors against the persistent challenges of the macroeconomic and retail apparel environments. Our outlook includes expectations for the first quarter and the full year of 2023. Let me start with Q1. Compared to the first quarter of 2022, we expect the following: Comparable sales of negative low double-digits; gross margin rate to decline approximately 850 basis points; SG&A expenses as a percent of sales to deleverage approximately 500 basis points; diluted loss per share of $0.70 to $0.80; inventory to move closer to parody with sales trends as the year progresses.

Compared to full year 2022, we expect the following: Comparable sales of positive low single digits; diluted loss per share of $0.85 to $1.05; capital expenditures of approximately $55 million. At an upcoming investor event. I will share more about our expected growth trajectory over the next several years, and we’ll explain how we expect the combination of a compelling strategy, exceptional execution, and a comprehensive and achievable financial roadmap will create long-term shareholder value. And now let me turn the call back to Tim.

Tim Baxter: Thank you, Jason. We are beginning a bold new chapter of our transformation and have a clear strategic roadmap. We intend to first achieve profitable growth in our core Express business. Second, to optimize our fully integrated omnichannel platform to create synergies and drive efficiencies across a portfolio of brands. And third, to accelerate our growth and profitability in partnership with WHP Global by scaling the Express brand through category and international licensing, and through the acquisition and operation of other fashion brands. We will accomplish all of this by operating with consistent, rigorous, and sustainable financial discipline to create shareholder value. This will be our President and Chief operating Officer, Matt Moellering’s last earnings call.

As we announced earlier this month, he will be retiring in May. For the past 20 years, Matt has been a driving force behind each stage of the company’s evolution. He played an instrumental role in taking the company private and taking the company public. His tremendous institutional knowledge and steady hand have provided continuity for our organization over a very long period of time. In the last three and a half years since I joined the company, Matt has been an extraordinary thought partner, someone who’s experienced and perspective I have valued a great deal. He helped to launch and advance our EXPRESSway forward strategy, helped steer our organization through the pandemic, and played an integral role in the formation of our new partnership with WHP Global.

I want to thank Matt for his leadership, his guidance, and his many contributions, but most of all for his support and positioning our company for the next chapter of our transformation. I know I speak for our entire organization when I say thank you, Matt. And now I’ll turn the call back over to the operator, so we can take your questions.

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Q&A Session

Operator: Thank you. We will take our first question from Eric Beder with SCC Research. Your line is open.

Eric Beder: Good morning.

Jason Judd: Good morning.

Tim Baxter: Good morning, Eric.

Eric Beder: In terms of the joint venture at WHP, what are you assuming from that in your 2023 guidance? And what should we be thinking about in terms of the acquisition criteria in terms of potentially, are you looking forward immediately these acquisitions to be immediately accretive.

Tim Baxter: Eric, thanks for the question and I’ll answer the first half on the — what’s included in our outlook and then turn it over to Matt to talk through the decision criteria. So, within the outlook, within gross margin, we will be impacted by the $60 million of guaranteed minimum royalty. And then within operating income, there will be our share of distributions from the joint venture back of roughly $20 million. So the net impact associated in the P&L outlook is $40 million on the year.

Matt Moellering: And then on the second piece, what we are looking for our acquisitions that do a couple things. One, provide profitable growth opportunity going forward, opportunities that provide significant synergy opportunities for us, acquisitions that provide new capabilities and that are complimentary to our Express fashion business as well. All four criteria don’t have to be met, but we are looking for opportunities that meet one or more of those requirements and that are significant return on investment opportunities for Express. Will they all be accretive in the first year? I wouldn’t say all of them will, but they all will drive significant economic profit over a very short period of time, and that’s what we’re looking for in opportunities.

Eric Beder: Okay. And in terms of what we’re seeing in the product, you’ve seen a number of items come in in terms of fashion basics for both men and women. What should we be seeing in terms of penetration going forward? And how — what should we thinking about in terms of the margin opportunities for those items versus the regular items or the fashion items?

Tim Baxter: Yeah. Well, obviously, our core assortments generate higher margins than our fashion deliveries. And that as I said during my prepared remarks, Eric, we had imbalances, particularly in our women’s business between core and fashion. The reality is that the fashion that we delivered in women’s sold very well. We just did not have the appropriate depth and breadth in our core categories to drive the volume that we needed to drive. And so, we have, as I said, reacted with great urgency to correct all of those imbalances in the women’s assortment. And we’re seeing improvement, as you said, as we see our core categories and the depth and breadth of our core categories coming back to life in our stores and online. So, our outlook that we’ve shared for the year indicates a sequential improvement as we move through the year in both sales and profit.

So, we are, obviously, expecting that the corrections that we’ve made to the imbalances in the assortment, particularly in women’s, are going to really reverse the sales trends that we saw in the fourth quarter.

Eric Beder: Great. And one quickie, you mentioned about the licensing. I understand what’s going in there. So, if you sign agreements for more international territories or for categories at the joint venture size, that would be incremental to your guidance. Is that how you should be thinking about that?

Tim Baxter: That is how you should be thinking about that. Yes.

Matt Moellering: Yeah. Our current guidance includes no impact from our relationship with WHP Global other than the royalty payment, which Jason described earlier.

Eric Beder: Great. Thank you and good luck for the 2023.

Tim Baxter: Great. Thank you, Eric.

Operator: And we will take our next question from Dana Telsey with Telsey Group. Your line is open.

Dana Telsey: Good morning everyone and Matt

Matt Moellering: Hi, Dana.

Dana Telsey: best of luck. Hi. Matt, best of luck in your next chapter. As we’re looking at

Matt Moellering: Thanks so much.

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Epsilon Energy Ltd. (NASDAQ:EPSN) Q4 2022 Earnings Call Transcript March 24, 2023

Operator: Good morning. And welcome to the Epsilon Energy 2022 Year End Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Andrew Williamson, Chief Financial Officer. Please go ahead.

Andrew Williamson: Thank you, Operator. And on behalf of the management team, I would like to welcome all of you to today’s conference call to review Epsilon’s fourth quarter and full year 2022 financial and operational results. Before we begin, I would like to remind you that our comments may include forward-looking statements. It should be noted that a variety of factors could cause Epsilon’s actual results to differ materially from the anticipated results or expectations expressed in these forward-looking statements. Today’s call may also contain certain non-GAAP financial measures. Please refer to the earnings release that we issued yesterday for disclosures on forward-looking statements and reconciliations of non-GAAP measures. With that, I’d like to turn the call over to Jason Stabell, our Chief Executive Officer.

Jason Stabell: Thank you, Andrew. Good morning to everyone and thank you for participating in our conference call. Joining me today are Andrew Williamson, our CFO; and Henry Clanton, our COO. We will be available to answer questions later in the call. I’m pleased to report that we delivered record profitability in 2022 and the company sits on a very solid foundation moving forward. Our positive results are largely due to the hard work of our team and I want to thank them for all their contributions. Here are some key highlights from 2022. Net revenue interest production was 27.3 MMcfe per day, down 6% year-over-year. We generated net income of $35.4 million, representing $1.51 per diluted share. Adjusted EBITDA grew 120% year-over-year to $53.1 million.

Free cash flow before changes in working capital increased by 139% year-over-year to $35 million. We increased our cash balance year-over-year by 69% to $45.8 million, including restricted cash, representing $1.96 per diluted share. We returned $12.1 million to shareholders during the year through our quarterly dividend and share repurchases. We have a debt free balance sheet with a growing cash position. Currently, we have available liquidity of approximately $75 million, comprised of $45 million in cash as of year-end and $30 million of undrawn borrowing availability under our revolving credit facility as of February this year. In 2022, we were largely unhedged, and as a result, we were able to capitalize on higher commodity prices during the year.

Our average realized price for the year, including hedges, was $6.09 per Mcfe. Realized prices were significantly higher year-over-year with natural gas realizations nearly doubling. The combination of sustained production and increased pricing resulted in a record adjusted EBITDA and free cash flow. This year’s $53 million of adjusted EBITDA compares to $40 million for the full year of 2021 and 2020 combined. We generated over $20 million in incremental free cash flow before changes in working capital over last year. Moving on to our assets. In Pennsylvania, five gross wells, 0.05 net were drilled and four gross wells, 0.21 net were completed during the year. The most notable was the Koromlan 107HC, which came online in August 2022. The well has produced strongly with cumulative production of 5.9 Bcf in just over four months in 2022.

Photo by Chris LeBoutillier on Unsplash

We have a 16% net revenue interest in the well. The Koromlan is a long lateral, nearly 14,000 feet completed in the Lower Marcellus and demonstrates the potential of our remaining drilling inventory in Auburn. We incurred $3 million in capital expenditures related to our Marcellus upstream assets, primarily attributable to the Koromlan well. While we do not operate, we will continue to work with the operator to develop the substantial remaining inventory. In Oklahoma, production was up to 2.6 MMcfe per day, a 30% increase over last year as we participated in the drilling of two gross wells, 0.26 net and the completion of three gross wells, 0.7 net for a total capital cost of $4 million net to Epsilon. One of the wells drilled in 2022 is awaiting completion in the first half of this year.

Our Oklahoma assets accounted for 13% of our upstream revenues during the year. These assets remain solid contributors with a mix of natural gas, oil and natural gas liquids. Our Auburn Gas Gathering System provides us with a steady stream of revenue and cash flow. Throughput in the system was up 5% compared to the prior year, which contributed to higher midstream revenues, up 3% year-over-year. Our midstream earnings growth potential is highly leveraged to incremental development in the Auburn area. Turning to our year-end reserve results. I would like to point out that we do not operate our upstream assets, and as a result, we often have limited visibility on future development plans. We use best estimates based on the information from operators and our team’s view on the optimized development plan for returns.

In the latest reserve report, we reduced estimated near-term capital expenditures based on discussions with our operators. This change resulted in a portion of our prior PUDs shifting outside the five-year SEC window required for proved classification. However, our total resource estimates did not change. We believe the current assumed pace of development will likely eliminate the need for any similar downward adjustments in future years. We continue to believe that our acreage is the highest quality, as demonstrated by our 2022 results and we will continue to work constructively with our partners to best realize the value of our assets. For year-end 2022, we reported SEC proved reserves of 94.3 Bcfe, which included an increase of 7.2 Bcfe improved developed producing reserves, comprised of 9.9 Bcfe of positive performance revisions and an increase of 7.3 Bcfe due to the new wells completed.

These additions were partially offset by 10 Bcfe of production. We saw the impact of the five-year SEC booking rule in our PUD reserves. We had a 23.5 Bcfe reduction from previous estimates due to the aforementioned change in our development timing assumptions. We anticipate reclassifying these reserves back to prove once we have line of sight on development timing. Despite the reclassification of these PUD reserves, we saw a significant increase in our overall PV10 value, driven by higher SEC pricing. The PV10 value of our SEC proved reserves at year-end 2022 increased by $85 million to $193 million. Approximately 95% of year-end 2022 SEC proved reserves were natural gas, 3% NGLs and 2% crude oil. The reserves were classified as 86% proved developed producing and 14% proved undeveloped.

We have a solid asset base that will continue to provide meaningful cash flow to our shareholders for many years. As we look ahead in 2023, we are focused on continuing to deliver strong results. We believe that Epsilon is well positioned for continued success in a variety of commodity price environments. In late December, we hedged over 1 Bcf of 2023 production for the April to October period at a net realized price of $3.96 MMcf. We remain focused on returning capital to our shareholders through our dividend and share buyback programs. To that end, yesterday, we announced a new buyback program, which will run for 12 months. We have increased the cap to 10% of shares outstanding or 2.3 million shares, our regulatory limit. Finally, our strong balance sheet positions us to actively pursue accretive business development opportunities.

Our initial focus has been in Appalachia, where our deep knowledge and long history in the basin distinguish us from other small to midsize companies. However, we will also consider opportunities in other basins, if attractive and consistent with our strategy. We believe that the recent volatility in commodity prices could help augment the number of attractive opportunities in the A&D and farm-out markets. We believe that our ability to quickly evaluate and execute on opportunities makes us an attractive counterparty. We are excited about the future and remain focused on creating value for our shareholders. This includes working closely with our operators on our existing assets, ongoing BD efforts and better highlighting the attractive value proposition of our shares to the investment community.

Operator, we can now open the lines for questions.

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Q&A Session

Operator: Thank you. And the first question will be from Tom McIntyre from MFS . Please go ahead.

Unidentified Analyst: Good morning, all. Thank you for the update. I have two things. You mentioned looking at basins in the Marcellus, I think, you talked about it on the last call, but given the price of natural gas, and obviously, your hedging move was a good one. What’s your thinking about that I just don’t see how you can be and if you’re not the operator how you would want to risk more capital into this sort of market at this time and that’s one thing? And it kind of leads me to my second question would be, last year, as you reported, you spent $6 million or $7 million buying back stock, but the number of shares really didn’t fall hardly at all. This year is a larger buyback, and as a shareholder, I’m interested in seeing that share count fall.

So maybe you could address that, obviously, you had something to do with option expiration and I don’t know what the level and pace for that might be in the New Year. But the two in terms of capital allocation, whether investing in basins or buying your own shares seem to be somewhat related while we have natural gas at these prices? Thank you.

Jason Stabell: Hi, Tom. Thanks for joining and I appreciate the questions. So, for your first question on Marcellus investment opportunities, clearly, the rollover in nat gas prices has challenged a lot of different investment opportunities there. I think our view is, we’ve got a pretty disciplined approach on our cost of capital. We’re looking at stuff there and if the opportunity set meets those criteria, then I think we would consider it. For sure, there are less people probably out looking to move assets. So opportunities that may come to the fore for us probably are more on the farm-out side. I mean that’s a bit of speculation, but people that want to keep drilling rigs going. I think everybody’s of the view or a consensus view is we’re in a middling period here on that gas, but the medium- to long-term picture is still quite strong.

We are going to keep looking, and as we mentioned on today’s call, we’re also considering inbound investments. I think our balance sheet and ability to move pretty quickly. We get quite a few inbounds from other basins of investment or possible investment opportunities. So we’re staying busy. But you’re right. It it’s a more challenged environment on the nat gas side. On your buyback, I think, first, to address the year-over-year share count. I’d say probably the big driver last year on that is the management transition. There were a number of shares that accelerated. So that drove the issuance there. Otherwise, I think, we would have had a more meaningful year-over-year drop. And with the buyback in place for this year, yes, we’d expect — if we find attractive opportunities to buy the stock that we would drive down the overall shares outstanding.

Muscle Maker, Inc. (NASDAQ:GRIL) Q4 2022 Earnings Call Transcript March 25, 2023

Operator: Hi, everyone. Thank you for joining today’s call. We’re going to give it a few minutes just for everybody to funnel in, and then we will go ahead and begin. Thank you.

Unidentified Company Representative: Thank you, operator, and welcome, everyone, to Muscle Maker, Inc.’s Year-End 2022 Earnings Call. Before we get started, I would like to say that this call may include forward-looking statements pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. To the extent that the information presented on this call can discuss financial projections, information or expectations about business plans, results of operations, products or markets or otherwise make statements about future events, such statements may be forward-looking. Such forward-looking statements can be identified by the use of the words such as should, may, intends, anticipates, believes, estimates, projects, forecasts, expects, plans and proposes.

Although management sees that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading Risk Factors and Elsewhere in documents that Muscle Maker, Inc. files from time to time with the SEC. Forward-looking statements speak only as of the date of the document in which they are contained, and Muscle Maker, Inc. does not undertake any duty to update any forward-looking statements, except as may be required by law. For this call, all numbers disclosed have been rounded to the closest thousand and percentages have been rounded to the closest percent.

With me on the call today are Muscle Maker’s Chief Executive Officer, Michael Roper; and Chief Financial Officer, Jennifer Black. Michael and Jennifer will be presenting prepared remarks related to the financials filed on March 21, 2023, and those documents may be found on Muscle maker’s IR website, Newswire fees and on the SEC’s website linked from the Muscle Maker IR pages. At this point, I would like to turn the call over to Muscle Maker’s CEO, Michael Roper. Michael?

Michael Roper: Thanks, , and welcome to everyone joining us on our call today. 2022 was a transformative year for Muscle Maker as we focused our franchising efforts on Pokemoto and launched our new wholly owned subsidiary, Sadot LLC. In Q4 2022, we began evolving Muscle Maker by strategically diversifying into a food-focused company delivering high-quality, healthy food to consumers through our restaurants and to manufacturers by an international agri commodity shipping, sourcing and farming business. Our goal is to create a comprehensive global food supply chain company, spanning from sustainable farming, agri commodity shipping, distribution, production and with the goal of ultimately reaching consumers through our restaurant franchising and meal prep companies.

Today, we’ll be discussing our new diversification strategy and the impact of Sadot on operational and financial results and the performance of our restaurant division with an emphasis on Pokemoto. Now I want to turn our attention to Sadot, our new wholly owned subsidiary and its strategic in the global food supply chain. As I’m sure, many of you have seen the recent announcements and want to fully understand what this all means to Muscle Maker. Let me start by recapping why 2022 was a transformative year from the beginning. Sadot was formed in October 2022 and is a wholly owned subsidiary of Muscle Maker, Inc. Its purpose was to diversify the company’s operations and lines of business from the local U.S. restaurant and franchising business and catapult us into the global food supply chain.

All financial performance of Sadot is consolidated upwards to the parent company, Muscle Maker, Inc. Some of you might ask is other private and institutional investors have over the past few months, why do we choose this trajectory, departing from our legacy restaurant and franchise business and the move into the global food supply chain. The answer lies in the understanding of the agriculture and food landscape today and in the very near future to come. We’ve all seen how world events such as COVID and the war in Ukraine can be disruptive to the world’s supply chains on a local level. Food security and sustainable farming has become household terms, and we can only imagine what the world’s food market will look like when populations approach 10 billion people.

We understand that going forward, as a food company that’s committed to apply healthy food and sustainable practices, we need to invest in laying the groundwork today in order to bring value for years to come. On November 18, 2022, we announced an agreement with AGGIA LLC FZ to manage the day-to-day operations of Sadot. AGGIA is an international consulting company managed by seasoned professionals in various aspects of the global food supply chain. AGGIA manages the day to day operations of Sadot. Our agreement with AGGIA was designed as a pay-for-performance model, where AGGIA only earns shares of Muscle Maker common stock when they drive net income in the Sadot subsidiary. AGGIA can earn up to 14,424,275 shares of common stock, which would require them to generate approximately $22.538 million of net income for Sadot.

The calculation of shares earned uses net income generated in Sadot and this is divided by a premium share price of $1.5625 per share to $1.5625 per share. AGGIA also has the right to nominate up to 8 new Board members, of which 1 was nominated upon execution of the agreement and the balance are based on certain net income thresholds. These thresholds allow the nomination of 2 new directors at $3.3 million in net income, 2 additional new directors at $6.6 million in net income and the final 3 new directors at $9.9 million of net income generated into Sadot. The fact that AGGIA is paid in shares and can nominate board positions upon performance reflects AGGIA confidence in its abilities to perform as well as its confidence in Muscle Maker’s knowledge and management.

More than a consultancy agreement, this is really a joining of forces with a common goal. Because AGGIA can own more than 20% of the outstanding shares as well as potential future control of the Board of Directors, the agreement required that we hold a shareholder meeting to have each of these items approved by our shareholders. On February 28, 2023, the shareholders of Muscle Maker approved the transaction and all accompanying provisions. We view the formation of Sadot and the agreement with AGGIA with the approval of our shareholders as our official launch of our diversification strategy. Upon executing our agreement with AGGIA, we began implementing our new strategy by starting with the agri commodity shipping and trading portion of the food supply chain.

To be clear, we’re not sitting around with the computer trading electronic commodities. Instead, we’re actually shipping and trading physical commodities such as corn, wheat and rice, which are loaded on the cargo ships and transported between countries. A typical shipment may contain 25,000 to 75,000 metric tons with associated revenue values that range between $5 million to $40 million per shipment. Our first shipment was executed in the second half of November 2022. From mid-November through the end of December, basically half of Q4 Sadot with AGGIA’s day-to-day management generated $150,586,000 in revenue. To put that into perspective, the entire prior year revenue for Muscle Maker as a whole was $9,321,000. And in the final 6 weeks of Q4 alone, Sadot generated $150,586,000 in revenue.

This $150,586,000 in revenue generated $4,548,000 in net income or a 3% profit margin. By achieving this net income threshold and the execution of the agreement, AGGIA nominated and Muscle Maker approved the addition of 2 new Board members who bring extensive experience in the food supply chain and international business. I’d like to welcome Benjamin Patel, who was originally nominated to the Board of Directors upon execution of the agreement with AGGIA as well as Hannah O and Ray Shankar to the Board of Directors. Benjamin has worked in the global agricultural commodity trading field for over a decade and his experience spans across commodity trading, finance, M&A and operations. Hannah is an experienced agri-food business leader and certified sustainability professional with over 15 years’ experience with Bayer Crop Science and Manto.

Ray brings international legal expertise as a partner in a law firm where he manages the private wealth and family office practice. These 3 members of our Board of Directors bring a wealth acknowledged to Muscle Maker and help elevate the expertise of the new Sadot subsidiary. The agri commodity shipping business is centered on high revenue, lower-margin transactions. We believe we can improve on these margins overtime by only and managing sustainable farms. This will allow us to control the sustainability and quality of products at the farm level and enjoy the increased margins from supplying our own products to the supply chain. In addition, we’re in the process of cultivating our banking relationships with international financiers with the goal of developing more elaborate financial instruments, allowing us to conduct different types of transactions by taking possession of the physical commodities for longer periods of time or even owning our own cargo ships.

Photo by Jay Wennington on Unsplash

There are many ways to increase margins in this area alone, and we believe we have plans to address these areas in the future. In 2023 through the end of February, Sadot has generated over $100 million in additional revenue. This brings the total revenue generated since mid-November 2022 through February 2023 to over $250 million. Now that shareholders have approved the transaction, we believe we can begin executing at a faster pace moving forward. Our next phase with Sadot will be focused on entering farming and sustainable farm management with the goal of increasing margins and control commodities at the initial stage as well as enhancing the social, environmental and financial value to our company. As part of our agreement, all net income proceeds generated by Sadot will be reinvested in growing and executing against the food supply chain strategy.

Recently, by using proceeds from the $4,548,000 in net income generated in Q4, we placed a deposit on undeveloped farmland in Africa, representing over 27,000 acres of future development. While this transaction is billed in negotiation, our intent is to either develop this specific land or use the deposit on a more fully developed property, which could potentially generate revenue in 2023 versus further down the road, while also providing a potential opportunity to improve the profit margins in the core agri commodity shipping business. We are excited about the potential of Sadot in our company’s advancement in the global food supply chain. We believe our results to date have been very encouraging, and we look forward to further building out the supply chain strategy and executing against potentially improving margins.

Now I’d like to turn the call over to our CFO, Jennifer Black, to review the financial performance of the company for 2022. Jennifer?

Jennifer Black: Thanks, Mike, and thank you, everyone, for joining us here today. Before I begin, I would like to note that our financial results on Form 10-K were filed with the SEC on March 21 and in a press release that same day. With that, I’d like to give an overview of the financials for 2022. For the year ended December 31, 2022, our company-led revenues significantly increased and totaled $161,698,000 compared to $10,350,000 for the prior year ended December 31, 2021. The $150,348,000 increase is mainly due to the commodity sales revenue generated by Sadot in its servicing agreement with AGGIA. Sadot generated commodity sales revenue of $150,586,000 for the year ended December 31, 2022. The commodity sales revenue was attributable to the formation of Sadot and the generated from physical food-related commodities.

$150 million was generated from November 14, 2022, which was the date the servicing agreement was finalized with AGGIA through the end of the year. The restaurant division generated company restaurant sales net of discounts of $10,300,000 for the year ended December 31, 2022 compared to $9,321,000 for the year ended December 31, 2021. This represented an increase of $979,000 or 11%, which is mainly due to a full year of sales for Pokemoto restaurants in Superfit Foods compared to 2021 when these segments were acquired. Franchise royalties and fees for the year ended December 31, 2022 and 2021 totaled $727,000 and $778,000, respectively. This represents a decrease of $51,000 or 7%. Franchise fees are recognized income over the life of the franchise agreement.

As the franchise location closes, our franchise agreement is terminated for any reason, the remaining deferred revenue will be recognized in full at that time. In 2021, there were several Muscle Maker Grill franchises that closed, resulting in higher franchise fees recognized. Overall, our 2022 loss from operations narrowed by $1,330,000. This is mainly due to Sadot. However, our results were impacted by onetime expenses in 2022 or onetime gains in 2021. The onetime transactions that affected our net income for 2021 and 2022 are as follows; in 2021, we recorded $1,920,000, employee retention credit that reduced our labor expenses. In 2022, we recorded $670,000 of amortization expense that were not recorded in 2021 due to the transitioning of the trademark and Muscle Maker Grill from an infinite light asset to a finite light asset, resulting in an increase in amortization expense.

If you remove the effects of these onetime events, the company’s loss from operations would have improved by $3,920,000 compared to the $1,330,000 that was disclosed. The most significant change in expenses from prior year is the stock-based consulting expense at $3,602,000, for the year ended December 31, 2022. The stock-based consulting expense is the result of the consulting fees due to AGGIA for Sadot operations. Based on these service agreements with AGGIA, the consulting fees are calculated at approximately 80% of net income generated by the Sadot business segment. This expense is expected to be paid in stock in 2023. To elaborate a little further on the Sadot segment. It generated net income of $4,548,000. However, this net income was offset by the expense of the issuance of shares to AGGIA as per the terms of the agreement between Muscle Maker and AGGIA for the management of Sadot.

In this Sadot service agreement with AGGIA, AGGIA earns Muscle Maker shares at a premium share price of $1.5625 per share and can earn up to 14,424,275 shares, which is the equivalent to generating $22,538,000 in net income in Sadot. Once AGGIA has reached maximum number of shares they can acquire, the consulting fees due to AGGIA will accrue as debt payable by Sadot to AGGIA. As Mike previously mentioned, we view the agreement with Sadot as joining forces towards a common goal. Therefore, we clearly see how the expense to AGGIA is actually an investment towards our future growth. As of December 31, 2022, we had cash balance of $9,898,000 and a working capital surplus of $4,033,000. With that, I’d like to turn the call back over to Michael Roper.

Michael Roper: Thanks, Jennifer, for that financial overview and kind of amazes me to go through all the numbers and didn’t get to twisted so that’s actually good. So we believe our new diversification strategy, okay, will have a significant impact on our company. To date, Sadot has generated over $250 million in revenue and reported net income in the Sadot division in Q4 of $4,548,000. Muscle Maker is a food-based company. Simply put, as an example, we feed people, and our company is evolving. Our strategy is changing. We like to think of Muscle Maker, Inc., which is our parent company as more of a holding company with multiple operational divisions. Basically, we have the newly created supply chain division, Sadot and then our restaurant division.

We’ve spoken about Sadot. Now let me walk everyone through an overview of how the restaurant division has performed. Our restaurant division is seeing continued improvements in our key performance metrics. As a percentage of company restaurant net sales, our revenue is up by 10.51%. Our labor percent — expense after adjusting for the 2021 ERC credits was reduced by 3.85%. Our rent expense — percent reduced by 1.97%. Our other restaurant operating expenses as a percent were reduced by 2.86%, and our food and paper costs, although they’re up slightly, increased by 0.35%. However, I actually consider the — considering the inflationary pressures on food and paper products in the industry that we faced this year, I think we did a pretty good job managing our costs here.

So we’re up slightly in food and paper costs. And then finally, our SG&A was reduced by 27.08%. So all of our key performance metrics are improving or are basically flat in the inflationary environment. So pretty good stuff that’s happening there. Not only are we excited about the potential and performance of Sadot, we remain focused on growing the restaurant division. Our restaurant division consists of 3 brands: Muscle Maker Grill restaurants, Superfit Foods meal prep and Pokemoto, Hawaiian Poke. All of our restaurant brands focus on healthier-for-you menu options. Muscle Maker Grill is our legacy brand and has been in business for over 25 years. We currently have 16 locations open with 1 new franchise location under construction. Superfit Foods is a meal prep company based in the Jacksonville, Florida market.

Superfit is a subscription-based model that focuses on premade meals, Meals are prepurchased and assembled in a temperature-controlled facility and delivered the branded coolers placed in fitness facilities in 34 pickup locations throughout the Jacksonville market. We believe the key to our growth and performance in the restaurant division is directly tied into growing the Pokemoto brand and leveraging the corporate team’s background and growth through franchising. We currently have 28 Pokemoto locations open and operating today. We also have an additional 50 new franchise agreements that have been sold and not yet open. In addition to these 50 new franchise agreements, we’re also excited to be working on several combo stores where we’ll operate both a Muscle Maker Grill restaurant and a Pokemoto restaurant in the same location, under the same roof leveraging the existing infrastructure and reducing overall costs while offering a wide variety of options to our consumers.

Our first 2 test locations will be in Chelsea, New York, and Fort Sill in Lawton, Oklahoma. Our strategy has become the largest Hawaiian poke chain in the industry through our franchising model and strategic placement of corporate-owned locations. Pokemoto franchise locations generate initial franchise fees of up $25,000 per location upon signing the franchise agreement and then additional franchise royalty fee revenue of up to 6% of franchisee net sales each month once they’re open. A typical franchise agreement is 10 years with one 5-year renewal option. Some additional highlights I’d like to point out as Pokemoto is now open or coming soon in 16 states. These states include Connecticut, Rhode Island, Texas, Florida, New York, Massachusetts, Tennessee, South Carolina, Virginia, Mississippi, Kansas, New Jersey, Maryland, California, Oklahoma and Pennsylvania.

Pretty soon it’s going to be easier to say where we’re not in than where we are in, right? Pokemoto franchises are now available to be sold in all states aside from Hawaii. In 2022, we added California, Illinois, Indiana, Maryland, Minnesota, North Dakota, South Dakota, Virginia and Washington. We are also able to sell in the District of Columbia and Puerto Rico. We expanded Superfit Foods pickup locations to get up to 34 pickup locations. We launched our fully refrigerated production facility at Superfit Foods. We rolled out multiple menu items across Pokemoto, including lobster seafood salad as a new protein option, which actually provides for a lower food cost option and to enhance our dessert and beverage options. We created a new interior design package for Pokemoto focusing on Hawaiian theme.

We expanded our franchise sales team and we completed the full transition of the accounting and finance teams moving offices and personnel to the new location near Fort Worth, Texas. And finally, we integrated the Muscle Maker Grill meal plan menu into the Superfit Foods meal plan menu, expanding consumer choices. So a lot of things happening throughout the year. Our restaurant division is growing through our Pokemoto franchising efforts, and I’m proud of the team and what they’ve accomplished so far. I look forward to continuing to focus on Pokemoto franchising and what the team can do in 2023. To conclude, I think we’ve done a great job executing on our diversified growth strategy and look forward to what the future brings. We believe the messaging around our new strategy and evolution of Muscle Maker into the global food supply chain is just now being received.

We’ve hired investor relations companies to assist in getting this messaging out to the masses and look forward to building new relationships from these efforts. I want to thank our shareholders and stakeholders for the support of the company and our initiatives. Finally, I want to thank our employees for all they do, we’ve got an incredible team here who deserve credit for our success and will be proud to be part of what we have built here.

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Q&A Session

Unidentified Company Representative: Thank you, ladies and gentlemen, for joining us today. That will conclude management’s prepared comments on today’s call. If you have any comments or questions, please direct them to us through the company’s new IR website at www.ir.musclemakergrill.com, or reach out to us via phone or e-mail.

Operator: Goodbye.

End of Q&A:

In this article, we take a look at the 12 most advanced countries in cybersecurity. For more such countries, go to 5 Most Advanced Countries in Cybersecurity. 

Cyberspace is increasingly being considered the fifth dimension of warfare after land, sea, air and space. Interest in cybersecurity has increased during recent years for both offensive and defensive purposes, as battlefield and strategic-weapons management, and military operational coordination is increasingly happening in cyberspace. 

In this respect, cyberspace has paved the way for strategic offensive advantages in its domain, and necessitated defensive capabilities and cyber resilience as well. 

The US, in this regard, has launched the Joint Cyber Defense Collaborative, through its Cybersecurity and Infrastructure Security Agency (CISA). CISA is expected to have its funding increased by 12% in FY2023, reaching $2.9 billion, which is $313 million above the funding it received in the last fiscal year. The budget is expected to help CISA enhance its threat hunting, cyber-vulnerability management and cybersecurity training programs. 

When it comes to the organization’s Joint Cyber Defense Collaborative program, it is enlisting several major tech corporations like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOG) to help improve its cybersecurity infrastructure. 

Microsoft Corporation (NASDAQ:MSFT) is known for the widely used security system called Microsoft Sentinel, which delivers across-enterprise threat intelligence. Microsoft Corporation (NASDAQ:MSFT) is also known for Priva, Purview and Entra, among other advanced security solutions.

Alphabet Inc. (NASDAQ:GOOG), on the other hand, boasts cloud-based security solutions like Cloud IDS, VPC Service Controls and Confidential Computing, among Alphabet Inc. (NASDAQ:GOOG)’s top solutions. Lastly, Amazon.com, Inc. (NASDAQ:AMZN) integrates various top-notch cybersecurity services in its Amazon Web Services cloud.

Cybersecurity Trends to Watch: 2030

Among the cybersecurity trends for 2030 highlighted by the World Economic Forum, concerns surrounding the abuse of AI capabilities in cyber threats were the most noteworthy in terms of malware, ransomware, online social engineering and propaganda. 

Machine learning is advancing at a rapid pace and AI can be used to create malware that is more difficult to detect and harder to remove. For example, attackers can use AI to create polymorphic malware that changes its code every time it infects a new system.

Machine learning models can also be used to carry out more sophisticated and effective ransomware attacks. Attackers can use AI to identify valuable targets and customize their ransom demands based on the target’s financial situation.

Cybersecurity Industry Outlook: 2030

According to a report by Grand View Research, the global cybersecurity market was valued at $203 billion as of 2022, and is projected to grow at a solid CAGR of 12.3% during the forecast period of 2023-2030, reaching $500.7 billion in value by 2030. 

Factors driving the growth include an increasing number of cyberattacks, cloud computing and losses that firms are incurring due to cyberattacks, motivating them to seek cybersecurity solutions. 

According to a report by International Business Machines Corporation (NYSE:IBM), the global average cost that companies incur due to data breaches is $4.35 million as of 2021. Since the International Business Machines Corporation (NYSE:IBM) report, data breaches have increased by 13%, with 83% of the studied organizations having their data breached more than once. 

One of the problems highlighted in the industry by the Grand View Research report is the high costs of cybersecurity solutions, compelling many enterprises to seek unlicensed solutions, which although work against known threats, are ineffective against novel threats, and are often carrying trojans themselves. 

The GVR report further highlighted that the hardware segment, within the broader cybersecurity industry, is growing at a high growth rate of over 12%. On the other hand, the cloud security segment held the highest share of revenue in 2022, at over 25%. 

Defense contracts accounted for more than 20% of the global market, and when it comes to regional cybersecurity markets, Asia-Pacific is the fastest growing. 

Many countries have advanced highly in cybersecurity, primarily for military purposes, like Israel. It is popularly known for Pegasus spyware developed by NSO Group. Pegasus is a suite of exploits that targets many different vulnerabilities in computer systems. Israel was also among the countries which were accused by Iran for the Stuxnet attack, which sabotaged Iranian centrifuges. 

Israel has a formidable reputation in cybersecurity and ranks on the top 19th spot on the Belfer Center’s National Cyber Power Index of 2022. It is particularly ahead in dimensions like destructive and defensive cyber capabilities but lags behind many other countries in the financial and information-control dimensions of cybersecurity.

With the backdrop, let’s head to the 12 most advanced countries in cybersecurity. 

Photo by Jefferson Santos on Unsplash

Our Methodology

We have defined ‘advanced countries in cybersecurity’ as ones which are well-equipped in cyberspace in terms of infrastructure and talent, and boast high capability and readiness in the industry for both defense and industry-related purposes.

In this respect, we’ve relied on the National Cyber Power Index of 2022 by Cyber Project and ranked the countries as such, in ascending order of high advancement in cybersecurity. 

Here are the 12 most advanced countries in cybersecurity.

12. Ukraine

Ukraine boasts capabilities in threat intelligence and cyber defense, developed as a reaction to the country being a target of numerous cyberattacks, including the NotPetya ransomware attack. 

In 2016, Ukraine created a National Cybersecurity Coordination Center to facilitate cooperation between government agencies, private companies, and international partners in addressing cyber threats. 

Additionally, Ukraine has developed a number of initiatives to promote cybersecurity education and training, including the establishment of specialized universities and training programs.

Ukraine is also home to a number of leading cybersecurity companies, including Ciklum, a global software engineering and technology company that specializes in cybersecurity, and whose board is chaired in Kyiv, and SoftServe, a digital-solutions company which offers a range of cybersecurity services.

11. Germany

Germany is home to several world-renowned cybersecurity research institutions and companies, and the German government has taken significant steps to strengthen the country’s cybersecurity posture.

For instance, Fraunhofer Institute for Secure Information Technology (SIT) is one of the world’s leading cybersecurity research institutions. The institute conducts research on a range of cybersecurity topics, including secure communication protocols and secure software development.

Germany is also home to a number of cybersecurity companies, such as Siemens Cybersecurity and G DATA CyberDefense. These companies provide a range of cybersecurity services, including threat detection and response, data protection, and risk management.

The Federal Office for Information Security (BSI) of the German government also operates a national cybersecurity emergency response team and conducts cybersecurity research and development.

10. Iran

Iran, like Ukraine, has been the target of sophisticated cyberattacks, including the Stuxnet worm attack, which sabotaged Iranian centrifuges in relation to the country’s nuclear program. 

Iran has made progress in developing its own technology and capabilities in this area. The country has established several cybersecurity research centers, including the Iran Computer Emergency Response Team Coordination Center (CERTCC), which is responsible for managing cybersecurity incidents and providing training and support to other organizations.

Iran has also developed its own cybersecurity software and tools for both defensive and offensive purposes, including antivirus programs and intrusion detection systems. Iran was accused of the Shamoon-malware attack, which targeted the industrial and energy sectors in gulf countries like Saudi Arabia and Qatar.

The International Business Machines Corporation (NYSE:IBM)’s X-Force also suspects elements in Iran to be behind the development and deployment of ‘Zerocleare’, a malware from the Wiper class, which was used against industrial targets in a number of Middle Eastern countries. 

9. France

France has established several cybersecurity research centers, including the National Agency for the Security of Information Systems (ANSSI), which is responsible for ensuring the security of France’s critical infrastructure and government networks. ANSSI also provides support and advice to private sector organizations on cybersecurity issues.

France has also made significant investments in cybersecurity research and development, with a focus on areas such as artificial intelligence, cryptography, and secure communication technologies. One of the latest investment announcements of $1 billion came in 2021, when French hospitals were targeted with cyberattacks amid the pandemic, with hospitals accounting for 11% of all cyberattacks in the country in 2020. 

In addition to its domestic capabilities, France is also an active participant in international cybersecurity initiatives and partnerships, including the European Union Agency for Cybersecurity (ENISA) and the NATO Cooperative Cyber Defence Centre of Excellence (CCDCOE).

8. South Korea

South Korea has been known for various high-profile cybersecurity tools. Among these is AhnLab V3, which uses a combination of signature-based and behavior-based detection techniques to identify and prevent malware attacks.

South Korea has several institutions dedicated to cybersecurity, including the Korea Internet and Security Agency (KISA) and the National Intelligence Service (NIS). 

The government has also implemented various policies and initiatives to promote cybersecurity, including the establishment of a national cybersecurity strategy and the adoption of advanced technologies such as blockchain and artificial intelligence (AI) to enhance cybersecurity.

7. Vietnam

Vietnam is rapidly emerging as one of the top players in cybersecurity, with the country having the foundation of numerous offensive/defensive cybersecurity tools to its credit.

Some of these include BKAV, an antivirus program developed by Vietnam’s Bkav Corporation, Aegis, an advanced threat detection and prevention program developed by Viettel Cyber Security, and CyRadar, a vulnerability assessment program developed by Vietnam’s Computer Emergency Response Team. 

The country has also joined several international organizations focused on cybersecurity, including the ASEAN Ministerial Conference on Cybersecurity and the APEC Cybersecurity Strategy.

6. Netherlands

The Netherlands is one of the most advanced countries in cybersecurity. The Dutch government has established several cybersecurity research and innovation centers, such as the Delft University of Technology and the Dutch Cybersecurity Consortium, which brings together academic institutions, businesses, and government agencies to develop new cybersecurity technologies and strategies.

In addition, the Netherlands has a strong cybersecurity industry, with numerous cybersecurity companies, including Fox-IT and Northwave, which provide cybersecurity services and solutions to both domestic and international clients. Apart from that, it also hosts companies like Amazon.com, Inc. (NASDAQ:AMZN), which provide cutting-edge cloud security solutions to enterprises in the country. 

Cybersecurity is also highly institutionalized in the Dutch private sector. According to a 2019 report by Hiscox, companies in the Netherlands spend an annual average of $1.9 million on cybersecurity. 

Click to continue reading and see the 5 Most Advanced Countries in Cybersecurity. 

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Disclosure: none. 12 Most Advanced Countries in Cybersecurity is originally published on Insider Monkey.

In this article, we take a look at the 5 most advanced countries in cybersecurity. For more such countries, go to 12 Most Advanced Countries in Cybersecurity.

5. Australia

Australia reserves its spot among the most advanced countries in cybersecurity, owing to a sophisticated cyber infrastructure, talent and investment. 

The Australian government has implemented several initiatives and policies to promote cybersecurity, including the establishment of the Australian Cyber Security Centre (ACSC), which provides advice and guidance on cybersecurity issues to both government and private organizations. 

Moreover, the country aims to advance its capabilities further by 2030, committing an investment of $6.6 billion for national intelligence and cyber capabilities.

Australia has a robust cybersecurity industry, with numerous cybersecurity companies, such as Data#3 and CyberCX, which provide cybersecurity services and solutions.

In this article, we will take a look at the 16 best places to live in Florida for young adults. If you want to see more places in this selection, go to the 5 Best Places to Live in Florida for Young Adults.

We recently published an article on best places to live in Florida. The article received a lot of traction and popularity among our readers. That’s why we decided to focus more on the sun state and discuss places that are ideal for young adults to live in the state.

Florida is the third-most populous state in the USA, with a population of approximately 22.36 million as of January 2023. The state’s capital is Tallahassee, and its largest city is Jacksonville. The Sunshine State is known for its warm weather, beautiful beaches, and diverse wildlife. It is a famous tourist destination, attracting millions of visitors each year. The state also has a strong economy, with industries such as tourism, agriculture, and aerospace contributing significantly. Florida is home to several famous attractions, including Walt Disney World, Universal Studios Orlando, and the Kennedy Space Center. It also has several national parks and protected areas, such as the Everglades National Park and the Dry Tortugas National Park.

Employment Trends

In February 2023, Florida had a seasonally adjusted nonagricultural employment of 9,681,900, which marked a month-on-month increase of 38,800 jobs, or 0.4%. Over the year, the state added 427,400 jobs, reflecting a 4.6% increase. In comparison, the number of jobs across the US rose by 2.9% over the same period. Over the year, several industries in Florida experienced job gains. Leisure and hospitality recorded an increase of 104,700 jobs or 8.7%, education and health services observed a gain of 6.5%, while financial activities experienced an increase of 25,200 jobs or 3.9%. As of February 2023, some of the counties with the lowest unemployment rates in Florida were Monroe County at 1.6%, Miami-Dade County at 1.7%, St. Johns County and Gulf County at 2.2% each, and Wakulla County and Okaloosa County at 2.3%.

While Florida boasts a strong economy, as discussed in our article 16 Best Places to Live In Florida, it is not a very cheap state to live in. According to the 2022 Annual Average Cost of Living stats released by the research division of the Missouri Department of Higher Education and Workforce Development, Florida is the 22nd most expensive state in the US to live in, with the average cost of living being 2.8% higher than the national average. Meanwhile, when it comes to grocery prices, Florida is the 12th most expensive state, with prices that are 5.4% higher than the national average. Furthermore, the cost of housing for both renting and buying is 8.5% higher than the national average, placing Florida in the 21st most expensive position among all US states.

While Florida’s cost of living is higher than some other states, it still remains relatively affordable compared to other major economic hubs in the USA. The state is known for offering a business-friendly environment with attractive tax incentives and access to substantial investment capital. According to the U.S. Small Business Administration (SBA), small businesses are a vital component of Florida’s economy, constituting 99.8% of all businesses in the state and providing employment to 3.6 million individuals as of 2021. Meanwhile, some of the bigger corporations operating in Florida include Hertz Global Holdings, Inc. (NASDAQ:HTZ), ADT Inc. (NYSE:ADT), and Spirit Airlines, Inc. (NYSE:SAVE). To check out more leading companies in the state, go to the 25 Biggest Florida Companies and Stocks.

Our Methodology

Several variables were taken into account to shortlist the 16 best places to live in Florida for young adults. The criterion included educational facilities, employment prospects, healthcare, and the overall cost of living, which included costs for housing, transportation, and other necessities. Furthermore, the list also considered elements such as crime rates, culture and lifestyle, and climate. These seven aforementioned factors were used to assign an average score out of 10 to each place. The maximum score a location could receive was 70. We used a consensus opinion-based rankings approach and referred to 19 notable sources to constitute our score for each of the places. Some of the prominent sources that we consulted include Forbes, Travel and Leisure, US News, Quora, and Up Homes. The places have been ranked in ascending order of their total score.

Best Places to Live in Florida for Young Adults

16. Ocala

Total Score: 12

Ocala is a city located in Marion County in the northern part of the state, about 80 miles northwest of Orlando. The US Census Bureau estimates the population of Ocala to be around 64,096 as of July 2021. This makes it the largest city in Marion County. Ocala boasts a cost of living that is 6% lower than the state average and 5% lower than the national average, making it an affordable option for young adults. Furthermore, the housing market in Ocala is particularly attractive, with prices coming in at 9% lower than the national average. The Brick City is known for its horse farms and equestrian culture. The city is home to many horse-breeding farms, training centers, and riding trails and hosts many equestrian events throughout the year. The Ocala Jockey Club hosts international three-day eventing competitions, while the HITS Ocala Winter Circuit attracts top-rated horses and riders from across the country.

15. Port St. Lucie

Total Score: 16

Port St. Lucie is a city situated in St. Lucie County on Florida’s east coast and is about 50 miles north of West Palm Beach. As of July 2021, the population of the city stood at 271,523, making it the ninth-biggest city in the state. Port St. Lucie is known for its many golf courses, parks, and natural areas. The city is home to the PGA Village golf resort, which includes four championship golf courses designed by Tom Fazio and Pete Dye. The city also has several parks and natural areas, including the Savannas Preserve State Park, which offers opportunities for hiking, fishing, and kayaking.

14. Lakeland

Total Score: 21

Lakeland is a city located in Polk County in central Florida, about 35 miles east of Tampa and 55 miles southwest of Orlando. As of July 2021, the population of Lakeland was 115,425. Lakeland is known for its many lakes, parks, and outdoor recreational opportunities. The city is home to over 30 lakes, including Lake Hollingsworth, a popular spot for walking, jogging, and cycling. The city also has several parks, including the 1,267-acre Circle B Bar Reserve. The Swan City is home to the Polk Museum of Art, which features a collection of over 2,500 works of art.

13. Daytona Beach

Total Score: 22

Daytona Beach is situated on Florida’s east coast and is about 50 miles northeast of Orlando. As of July 2021, the population of Daytona Beach was approximately 74,437. The median home price in Daytona Beach stands at $278,897, while the median monthly rent is $1076. Daytona is amongst the best places to live in Florida for young adults due to its affordability compared to other metropolitan areas on the Atlantic coast. The city’s hard-packed sand beaches have been a popular destination for tourists and beachgoers for over a century, giving it the nickname of “The World’s Most Famous Beach.” The city is also home to the Daytona International Speedway, which hosts the Daytona 500 NASCAR race and other major motorsports events throughout the year.

12. Gainesville

Total Score: 29

Gainesville is a city located in Alachua County in north-central Florida and is approximately 70 miles southwest of Jacksonville and 120 miles north of Tampa. As of July 2021, the population of Gainesville was estimated to be around 140,398. Gainesville is known for being home to the University of Florida, one of the largest and most prestigious universities in the US. The city has a strong college-town vibe, with many restaurants, bars, and cultural attractions catering to the university community. The university also brings a large number of events to the city, including concerts, plays, and sporting events, making Gainesville an attractive place for young adults.

11. Tallahassee

Total Score: 30

Tallahassee is located in the panhandle region of the state. It is situated approximately 22 miles north of the Gulf of Mexico and about 165 miles west of Jacksonville. As of July 2021, the population of Tallahassee was approximately 197,102. Despite property values on the rise, local real estate in Tallahassee is relatively affordable compared to some other Florida cities. The property tax rate in Leon County, where Tallahassee is situated, is slightly lower than the national average, making local real estate more attractive. Additionally, residents do not pay a state income tax or property tax on vehicles, further contributing to the area’s affordability. Tallahassee is known for its rich history and culture, with several museums and historic sites located throughout the city. The city is home to the Florida State Capitol and the Florida Historic Capitol Museum.

10. Fort Myers

Total Score: 33

Fort Myers is the county seat and commercial center of Lee County. It has an estimated population of approximately 92,245 as of July 2021. The City of Palms is known for its beautiful beaches, water sports, and outdoor activities. It is also the gateway to many of the state’s best places of interest, such as Sanibel Island, Captiva Island, and the Everglades. The city has a rich history, as it was named after Colonel Abraham Myers, who served as a quartermaster during the Seminole Wars. It was also the winter home of Thomas Edison and Henry Ford.

9. Naples

Total Score: 41

Naples is known for its beautiful white sandy beaches, upscale shopping and dining options, and high-end real estate. It is also home to several golf courses, art galleries, and cultural institutions, such as the Naples Museum of Art and the Naples Philharmonic. Some of the attractions in Naples include the Naples Pier, which offers great views of the Gulf of Mexico and is a popular spot for fishing and sunset watching. Other popular attractions include the Naples Zoo at Caribbean Gardens, the Corkscrew Swamp Sanctuary, and the Naples Botanical Garden. The median monthly rent in Naples stands at $1317.

8. Melbourne

Total Score: 42

Melbourne is known for its beautiful beaches, cultural attractions, and outdoor recreation opportunities. It is also home to several high-tech companies, including L3Harris Technologies, Inc. (NYSE:LHX) and Northrop Grumman Corporation (NYSE:NOC). The “economic engine” of Brevard County has a strong military presence, with the Patrick Air Force Base and the Naval Ordnance Test Unit located nearby. It is also a popular destination for space enthusiasts, as it is located just a few miles from the Kennedy Space Center and the Cape Canaveral Air Force Station.

7. Pensacola

Total Score: 45

Pensacola is the county seat of Escambia County and has an estimated population of approximately 53,678 people as of July 2021. It is home to the Naval Air Station Pensacola, the primary training base for all Navy, Marine Corps, and Coast Guard aviators. Some of the interesting sites in Pensacola include the National Naval Aviation Museum, which features more than 150 aircraft and exhibits on the history of naval aviation. Other popular attractions include the Pensacola Lighthouse and Museum, the Fort Barrancas and Advanced Redoubt historic sites, and the Pensacola Bay Center, which hosts concerts and sporting events throughout the year.

6. Miami

Total Score: 49

Miami is the county seat of Miami-Dade County and has an estimated population of approximately 439,890 as of July 2021. This makes it the 44^th biggest city in the US in terms of population. Miami is known for its vibrant culture and diverse communities. It is a major hub for international trade and commerce, with a strong focus on tourism and the arts, making it an attractive place for young adults seeking employment opportunities. One of the top attractions in Miami includes South Beach, known for its Art Deco architecture, nightlife, and beautiful beaches.

Some of the leading companies operating in Florida include Hertz Global Holdings, Inc. (NASDAQ:HTZ), ADT Inc. (NYSE:ADT), and Spirit Airlines, Inc. (NYSE:SAVE).

Click to continue reading and see the 5 Best Places to Live in Florida for Young Adults.

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Disclosure: None. 16 Best Places to Live in Florida for Young Adults is originally published on Insider Monkey.

In this article, we will take a look at the 5 best places to live in Florida for young adults. If you want to see more places in this selection, go to the 16 Best Places to Live in Florida for Young Adults.

5. Cape Coral

Total Score: 50

Cape Coral’s outdoor recreation opportunities, scenic attractions, and entertainment options make it one of the best places to live in Florida for young adults seeking a vibrant and enjoyable place. The metropolitan area is known for its extensive canal system, which is one of the largest in the world and provides easy access to the Gulf of Mexico. The canal system has given Cape Coral the nickname of Water Wonderland. The city is also home to beautiful parks and nature preserves. Some of the scenic spots in Cape Coral include the Sun Splash Family Waterpark, which features water slides, a lazy river, and a wave pool. Other popular attractions include the Four Mile Cove Ecological Preserve, which is a 365-acre nature preserve that is home to a wide variety of plants and animals.

Travelzoo (NASDAQ:TZOO) Q4 2022 Earnings Call Transcript March 25, 2023

Operator: Hello, everyone. Welcome to the Travelzoo Fourth Quarter 2022 Financial Results Conference Call. . The company would like to remind you that all statements made during this conference call and presented in the slides that are not statements of historical facts constitute forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements are described in the company’s forms 10-K and 10-Q and other periodic filings with the SEC. Unless required by law, the company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Photo by Rolands Varsbergs on Unsplash

Please refer to the company’s website for important information, including the company’s earnings press release issued earlier this morning. An archived recording of this conference call will be made available on the Travelzoo Investor Relations website at travelzoo.com/ir. Now it’s my pleasure to turn the floor over to Travelzoo’s Global CEO, Holger Bartel; its Chief Financial Officer, Wayne Lee; and its General Manager, Travelzoo META, Arveena Ahluwalia. Wayne will start with an overview of the fourth quarter 2022 financial results.

Wayne Lee: Thank you, Regina, and welcome to those of you joining us today. Please open or refer to the management presentation to follow along with our prepared remarks. The presentation in PDF format is available on our Investor Relations website at travelzoo.com/ir. Let’s begin with Slide #3. Revenue growth accelerated in Q4, leading to much stronger earnings. Our consolidated Q4 revenue was $18.6 million, up 36% from $13.7 million in the previous year, and in constant currencies, it was $19.4 million, which is an increase of 42% year-over-year. Operating income, which we, as management, call operating profit was $3.6 million, which is approximately 19% of revenues compared to an operating loss of $3.8 million in the prior year.

As of December 31, we had $30.4 million unduplicated members compared to $30.3 million as of December 31, 2021. On Slide 4, we go into more details about the revenue and operating profit of our 2 more significant business segments, North America and Europe. North America segment revenue increased 53% year-over-year from $8.6 million to $13.1 million. The operating profit in North America was $3.7 million in Q4 compared to an operating loss of $2.1 million a year ago. Europe segment revenue increased from $4.3 million to $4.7 million or 9% year-over-year. At constant currencies, Europe revenue increased 23% year-over-year. Europe had an operating profit of $42,000 in Q4 compared to an operating loss of $1.7 million in the prior year. On Slide 5, you can see that our operating margin for all of 2022 reached 11%, which is at a level higher than our operating margins before the pandemic in 2020.

Before the pandemic, Travelzoo’s reported operating margin was much lower because of operating losses from our Asia Pacific segment. In March 2020, Travelzoo decided to exit its Asia Pacific business and operate it as a licensing business going forward. Now the operating margin shows the true profitability of Travelzoo in North America and in Europe. Slide 6 shows that our operating margin in North America reached 29% for Q4. On Slide 7, we provide information on non-GAAP operating profit as we believe it better explains how Travelzoo evaluates performance. This slide shows the non-GAAP operating profit, which was $4.8 million in Q4 compared to a loss of $2.4 million in the prior year. Slide 8 provides more information about the items that are excluded in the calculation of non-GAAP operating profit.

Please turn to Slide 9. As of December 31, 2022, consolidated cash, cash equivalents and restricted cash was $19.4 million. The cash balance reached the expected level as the number of vouchers outstanding has decreased greatly at the end of 2022. Slides 10 and 11 detail our revenue by business segment. The North America business segment saw a year-over-year revenue increase of $4.5 million. Turning to Slide 11. The Europe business segment, which we report in U.S. dollars was and continues to be impacted by the strong dollar. We saw revenue in Q4 increased by $384,000. But in constant currencies, revenue increased $1 million year-over-year. Slide 12 shows that the pandemic led to a significant reduction of fixed costs. We believe we can keep our fixed costs relatively low in the foreseeable future, while revenues are expected to grow.

For Q1 2023, we currently expect higher revenue and profitability. During the pandemic, we have been able to lower our fixed costs. We believe we can keep our fixed costs relatively low in the foreseeable future. Now I turn over to Holger.

Holger Bartel: Thank you, Wayne. Revenue growth accelerated in both North America and in Europe, leading to much stronger earnings. As the recovery from the pandemic continues, we will leverage Travelzoo’s global reach and trusted brand to further improve earnings in future periods. With more than 30 million members, 7 million mobile app users and 4 million social media followers, travelers with love by travel enthusiasts, who are affluent, active and open to new experiences. Slide 13 provides more information about our members. 87% say they are open to new destinations and travel ideas. So Travelzoo members are travel enthusiasts. Slide 15 provides an overview of what management and our global team are focused on. We want to reach and surpass pre-pandemic number of members and accelerate revenue growth.

We want to utilize higher operating margins to significantly increase EPS, grow Jack’s Flight Club’s profitable subscription revenue and launch Travelzoo META. At this point, I’d like to turn over to Arveena.

Arveena Ahluwalia: Hi, everyone. Today’s update will be super quick since the team is pretty busy with the launch of Phase 1 of Travelzoo META in the coming weeks. For today, please turn to the next slide for a first look at one of Travelzoo META’s marketing teaser. With that, I’m handing over to the operator for questions for Holger, Wayne and me.

See also 15 Best High Yield Dividend Stocks to Buy and 15 Most Promising Stocks to Buy According to Analysts.

Q&A Session

Operator: . Our first question comes from the line of Michael Kupinski with NOBLE Capital Markets.

Michael Kupinski: A couple of questions. I was wondering, Holger, can you kind of — you indicated that the third quarter is shaping up to be a little bit better. I’m sorry, the next quarter is shaping up to be a little bit better. I was just wondering if you can kind of put some color around that. What are you seeing in terms of people traveling both on North America versus Europe? Are there any disparities there? Then also, I have a few questions about Jack’s Flight Club as well.

Holger Bartel: Okay, Michael. So in general, as you see in Q4 and now again in Q1, it’s become easier for us to negotiate offers for our members that of course, resulting in more activity by our members and also advertisers are back much stronger than last year because there’s more confidence in travel and while we have high inflation everywhere and possibly recessions coming. Travel is one of the areas where consumers don’t want to — they don’t want to give up on it. They just want to do more for less and they are looking for better deals, and that’s I think where we are well positioned. So we see that continue in Q1. As you saw North America was a bit stronger. Europe is still lagging a bit. We see that gap closing in Q1 and probably this year. So in general, in Europe, travel activity is also quite good. And our business in Europe is improving better and more quickly now than probably last year, so that’s good.

Michael Kupinski: Got you. And then can you give us some color on voucher sales versus just — versus advertising in the quarter? And I noticed that as I’ve been traveling as well that prices in hotel rooms have gone quite high. And then it seems like more recently, we started to see more discounting. I was just wondering if you can add a little bit of color on that, too.

Holger Bartel: To answer your first question, vouchers have been — were very important during the early days of the pandemic. I would say, even the first 2 years of the pandemic because people just couldn’t travel and so they purchase the vouchers for future travel. They are less important today, a much smaller percentage of our business than they were in 2020 and 2021. Advertising revenue is now the majority of the revenue that we generate. So we’re a bit back to patterns, what we saw in 2019. And the same is with travel behavior. So with regards to your second question, we are clearly seeing now that there are patterns of periods when hotels are busy and patterns of periods when they are less busy, and that provides us an opportunity to negotiate great deals for our members again.

Michael Kupinski: You’ve indicated that there has been an increase in the number of subscribers at Jack’s Flight Club, but it seems to me like maybe the effort there has been a little disappointing that we thought that maybe there would have been a little bit faster growth. And I know that maybe you’ve taken your foot off the accelerator of that one. But can you kind of give us your outlook for Jack’s Flight Club?

Holger Bartel: Yes, you’re right, it grew less in 2022 than what we were hoping for, but we also were looking for the right time to promote the service. Now airfares are very high. People are very interested in a service that provides them information about the airfares. So in 2023, we are looking at much faster growth of Jack’s Flight Club compared to what we saw before.

Peraso Inc. (NASDAQ:PRSO) Q4 2022 Earnings Call Transcript March 24, 2023

Operator: Good afternoon and welcome to Peraso, Inc.’s Fourth Quarter and Full Year Financial Results Conference Call. As a reminder, this conference is being recorded today, Wednesday, March 22, 2023. I would now like to turn the call over to Peraso’s CFO, Jim Sullivan. Please go ahead.

Jim Sullivan: Thank you. Good afternoon and thank you for joining today’s conference call to discuss Peraso’s fourth quarter and full year 2022 financial results. I am Jim Sullivan, CFO of Peraso. And joining me today is Ron Glibbery, our CEO. This afternoon, we issued a press release and related Form 8-K, which was filed with the SEC. The press release and Form 8-K are available on Peraso’s website at www.perasoinc.com under the Investor Relations section. There is also a slide presentation that we will be using in conjunction with today’s call that maybe accessed through the webcast link on the IR website. As a reminder, comments made during today’s conference call may include forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking.

Peraso advises caution and reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows or other financial items, including anticipated cost savings. Also any statements concerning the expected development, performance and market share or competitive performance of our products or technologies, all forward-looking statements are based on information available to Peraso on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Peraso’s actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in the company’s business.

More detailed information about these risk factors and additional risk factors are set forth in Peraso’s public filings with the Securities and Exchange Commission. Peraso expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additionally, the company’s press release and management statements during this conference call will include discussions of certain measures and financial information in terms of GAAP and non-GAAP. Included in the company’s press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. For those of you unable to listen to the entire call at this time, a recording will be available on the Investor Relations section of our website.

Now I would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks. Ron?

Ron Glibbery: Thank you, Jim. Good afternoon, and welcome to everyone joining today on the phone and via webcast. As outlined in today’s press release, Peraso achieved strong growth for the fourth quarter and full year, highlighted by a number of accomplishments across the business. Both product and total revenue in the fourth quarter were up double-digits sequentially and over 100% year-over-year. Our strong top line growth for the quarter and year was driven by robust demand and higher shipments of our mmWave ICs for fixed wireless access as well as our memory IC products. We also achieved meaningful improvement in our gross margins throughout the year. Reflecting back in 2022, I’m proud of the team’s execution during what was and continues to be a challenging environment for not only the semiconductor industry, but many industries across the globe.

All things considered, we had a productive full first year as a combined company following the completed merger transaction with MoSys in late 2021. Our strong year-over-year growth and expanded gross margin for the year are a testament to our differentiated technology and the team’s ability to deliver against customer demand despite wide-reaching supply chain challenges. Total revenue for the full year increased 162% over 2021, and we expanded non-GAAP gross margins to nearly 50%. Product revenue for 2022 grew 189% year-over-year, primarily reflecting the ramp in shipments from our mmWave and memory IC products. We also achieved significant business and product milestones during the year, including the launch of our PERSPECTUS product family for mmWave fixed wireless access and Peraso’s introduction of the world’s most integrated dual-band 5G mmWave beamformer IC.

Also notable was the appointment of Mark Lunsford as the company’s first Chief Revenue Officer in support of expanding Peraso’s commercial reach. I would also highlight the strategic Technology License and Patent Agreement that we entered into with Intel Corporation, which added non-dilutive cash to the balance sheet, while also contributing to a reduction in operating expenses. Shifting to an update on our primary target market. We’ve been very pleased with the increase in validation and growth of the fixed wireless access market over the past year. In fact, this growth accelerated in 2022 as fixed wireless access continued to capture a growing share of the broadband market. According to a recent report published by Leichtman Research Group, fixed wireless services represented 90% of all broadband net adds in 2022.

Together, T-Mobile and Verizon added nearly 3.2 million fixed wireless subscribers in 2022, which compared to approximately 720,000 net adds in 2021, representing year-over-year growth of more than 300%. To put these numbers in context, the longer-term market potential of T-Mobile’s home Internet and Verizon’s 5G fixed wireless service, are currently available to more than 40 million and roughly 30 million homes, respectively. The growing market momentum is derived from fixed wireless access being a natural extension of 5G deployments as carriers and service providers seek to maximize available bandwidth capacity while also delivering faster and lower latency connectivity to their customers. As I discussed on previous calls, there continues to be increased recognition across the industry, the mmWave technology will be required to address the challenges of continuously growing demand for wireless bandwidth.

In addition to the fundamental benefits of mmWave technology, including incremental wireless bandwidth, fast multi-gigabit access speeds and low latency, service providers are also recognizing its ability to address uniquely challenging use cases such as high congestion environments. One high-profile example of this was a State Farm Stadium in February for the Super Bowl, where there were nearly 68,000 fans in attendance. For those of us that have attended large menu sporting events or concerts in recent years, you’ve likely experienced the frustration of either limited or effectively no wireless connectivity due to the density of the crowd. Specifically to the Super Bowl, an estimated 60% of the fans were Verizon customers, and they collectively used 47 terabytes of data, which was a 57% increase over Super Bowl 2022.

Although Verizon acknowledged deployed supplemental C-band spectrum to bolster their service, Verizon’s VP of Device Technology named mmWave as the star of the show in terms of enabling the staggering demand and data traffic. The Super Bowl is only one example, however, where there continues to be a growing number of similar proof points that further emphasize the need for mmWave technology, which remains at the core of Peraso’s solution for both licensed 5G and unlicensed 60 GHz spectrum. For a broader perspective on markets, I want to share several takeaways from following my recent attendance of Mobile World Congress in Barcelona as well as from our team’s participation in WISPAMERICA earlier this month. At a high level, one of the most striking observations is that mmWave has made significant strides in terms of acceptance for really accepting the exponential wireless demand in the carrier market.

Specific to our own beamformer solution, it was clear based on our conversations and serving other vendors at the show that we offer the most highly integrated dual-brand device in the market. To that end, we engaged in multiple productive discussions relating to addressing the 5G consumer premise equipment, or CPE and help €“ Peraso’s 5G mmWave solution can enable more cost-effective and equipment as well as 5G mmWave deployments. We should remember that the cost of the CP equipment is the crucial aspect of the SaaS of mmWave in 5G fixed wireless access. In terms of carrier acceptance of mmWave technology, we believe mmWave will be eventually the go-to technology for 5G fixed wireless access. One of the industry analysts we spoke to indicated that the revenue per bit for mobile users in the carrier market is 20x the revenue per bit of fixed wireless access, which we expect will inevitably make mmWave the go-to solution for fixed wireless access in the carrier market.

Over the last year, we further substantiated our technology leadership through expanded customer orders and design wins as well as growing traction for both mmWave IC and integrated antenna solutions for fixed wireless access. After meeting with a number of the leading players at WISPAMERICA, I’m even more convinced that Peraso is establishing itself as a leading go-to mmWave vendor for wireless ISPs. In fact, we are now evaluating multiple requests and have accepted multiple requests for direct engagement to align on respective product road maps with certain wireless ISPs. Another prominent takeaway was the recognition and one of the primary benefits of mmWave is minimal network interference. More specifically, industry participants are acknowledging that WiFi-based connectivity is becoming increasingly difficult due to the scale to use €“ from signal interference generated by the surging number of connected WiFi devices.

Photo by Campaign Creators on Unsplash

Actually, recognition of this issue in a commercial setting was recently provided by a mmWave equipment supplier named Intracom, who announced the deployment of 300,000 mmWave subscribers in Italy, where they specifically cited immunity to interference as the primary benefit of their system. Finally, while acknowledging the current macroeconomic conditions and associated uncertainty, we remain optimistic about our compelling value proposition in the marketplace and ability to drive continued growth in 2023. We’re particularly encouraged by expanding opportunities in the fixed wireless market, both domestically and abroad as we further positioned Peraso to be a leading supplier of mmWave solutions across the licensed and unlicensed segments of the market.

Our main focus in 2023 is to further capitalize on our existing leadership position in 60 GHz, while also advancing a select targeted development projects with key perspective customers and partners. Intermediate term, over the next 12 to 18 months, we aim to leverage our current momentum in the wireless ISP market to penetrate the emerging mmWave opportunity in the carrier market, which is anticipated to ramp later in 2023 and into the first half of 2024. As part of our recently implemented cost reduction initiatives, we’re emphasizing development projects with near-term path to achieving return on investment, even though we continue to closely monitor potential longer-term opportunities. These include next-generation mmWave applications such as AR/VR connectivity as well as the industry’s formal evaluation of incorporating 60 GHz in future standards such as WiFi 8.

In closing, I am pleased with the momentum and expanding engagements that we’ve secured in 2022 and are extending into 2023 as we aim to build upon the strong first full year of combined operations. The recent actions we have taken to streamline the organization and reduce operating expenses position us to achieve improved operating results as we drive continued top line growth over the coming year. With that, I’ll turn the call back to Jim to review the fourth quarter and full year financials and provide our outlook for first quarter of 2023. Jim?

Jim Sullivan: Thank you, Ron. It’s great to be speaking with you all today. During my comments, I will make several references to non-GAAP numbers. Unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of reported intangible assets, impairments of goodwill, business combination transaction costs and the change in fair value of warrant liability. These non-GAAP financial measures and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related current report on Form 8-K, which was filed today with the SEC. Turning now to our fourth quarter and full year 2022 results. Total revenue in the fourth quarter increased to $3.9 million from $3.3 million in the third quarter of 2022 and $1.9 million during the same quarter a year ago.

Full year 2022 total revenue increased over 160% to $14.9 million compared with $5.7 million in the prior year. Product revenue from the sale of our integrated circuits and mmWave antenna solutions in the fourth quarter was $3.8 million compared with $3.1 million in the prior quarter and $1.9 million in the fourth quarter of 2021. For the full year 2022, product revenue was $14.2 million compared with $4.9 million in the prior year. The strong year-over-year growth of both fourth quarter and full year 2022 product revenue was primarily attributable to increased demand in shipments of our mmWave antenna product solutions and a full year of revenue contribution from our memory products. Royalty and other revenue comprised non-recurring engineering services and royalty revenues from licenses of our memory technology and was $0.1 million in the fourth quarter and $0.7 million for the full year 2022.

GAAP gross margin was 44.2% in the fourth quarter compared with 39.3% in the prior quarter and 30.4% in the year ago quarter. The full year 2022 GAAP gross margin was 40% compared with 42.4% in the prior year. On a non-GAAP basis, excluding amortization of acquired intangible assets, gross margin for the fourth quarter was 53.4% compared with 50.2% in the prior quarter and 30.4% in the fourth quarter of 2021. The sequential and year-over-year improvement in gross margin for the fourth quarter was primarily the result of increased shipments of the company’s memory IC products. As a reminder, the fourth quarter of 2021 included only 2 weeks of revenue contribution from our memory products following the closing of the business combination with MoSys, Inc., whereas the fourth quarter of 2022 reflected a full quarter of contribution from memory products.

For the full year 2022, non-GAAP gross margin was 49.7%. Non-GAAP product gross margin expanded to 52.6% in the fourth quarter compared with 46.3% in the prior quarter and 31.4% in the fourth quarter of 2021. For the full year 2022, non-GAAP product gross margin expanded to 47.3% from 33.3% in the prior year. The improvement in product gross margins for the fourth quarter and for full year 2022 was primarily due to the revenue contribution from memory IC products as well as increased shipments of our mmWave solutions. As reflected by our fourth quarter and full year results, we made considerable progress on driving expanded gross margin in 2022. For 2023, we continue to target a corporate non-GAAP gross margin of approximately 50% through a combination of anticipated revenue growth and benefits from increased scale and reduced production costs and our mmWave antenna product solutions as well as the ongoing contribution from sales of our higher-margin memory IC products.

GAAP operating expenses for the fourth quarter of 2022 were $16.2 million, which included a $9.9 million non-cash charge for the impairment of goodwill. This compared with $5.3 million in the prior quarter, which included a $2.6 million reduction associated with a gain related to a license and asset sale and $5.3 million in the fourth quarter of 2021. The $9.9 million non-cash charge for the impairment of goodwill in the fourth quarter of 2022 was determined by performing an impairment test, of which a key factor is the price of the company’s common stock and resultant market capitalization. For the full year 2022, GAAP operating expenses were $38.3 million compared with $18.5 million in the prior year. Total operating expenses for the fourth quarter of 2022 on a non-GAAP basis, which excludes stock-based compensation, amortization of reported intangible assets and the aforementioned goodwill impairment charge were $4.8 million compared with $3.7 million in the prior quarter and $3.7 million in the same quarter a year ago.

Full year 2022 operating expenses on a non-GAAP basis were $22 million compared with $12.3 million in the prior year. In February 2023, we announced that we had implemented cost-reduction initiatives to reduce operating losses and streamline operations as we further emphasize shorter-term market opportunities. We expect to decrease our operating expenses by approximately $5 million on an annualized basis, primarily from lower headcount and targeted reductions in expenses for certain longer-term research and development projects. To date, these initiatives remain on track, and we have begun to realize the cost reduction benefits. GAAP net loss for the fourth quarter of 2022 was $14.6 million or a loss of $0.71 per share compared with a net loss of $4 million or $0.20 per share in the prior quarter and compared with net income of $2.5 million or $0.28 per diluted share in the same quarter a year ago.

The full year 2022 GAAP net loss was $32.4 million or a loss of $1.61 per share compared with a net loss of $10.9 million or $1.86 per share in 2021. On a non-GAAP basis, net loss for the fourth quarter of 2022 was $2.8 million or a loss of $0.13 per share which exclude the stock-based compensation, amortization of acquired intangibles, the change in fair value of warrant liability and the goodwill impairment charge. This compared with a non-GAAP net loss of $2 million or $0.10 per share in the prior quarter and a net loss of $3.9 million or a loss per share of $0.51 in the same quarter a year ago. The full year 2022 non-GAAP net loss was $14.7 million or a loss of $0.73 per share compared with a net loss of $12.8 million or $2.19 per share in the prior year.

The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non-GAAP EPS for the fourth quarter of 2022 was 20.5 million shares, which excludes 1.8 million shares of our common stock and exchangeable shares that are escrowed pursuant to the terms of an escrow agreement related to the December 2021 business combination and is subject to earn-out based on achievement of certain stock price targets. Adjusted EBITDA, which we define as GAAP net income or loss as reported, excluding stock-based compensation, amortization of reported intangibles, change in fair value of warrant liability, goodwill impairment charges, interest expense, depreciation and amortization and the provision for income taxes was negative $2.5 million in the fourth quarter of 2022 compared with negative $1.8 million in the prior quarter and negative $2.8 million in the prior year period.

For the full year 2022, adjusted EBITDA was negative $13.7 million compared with negative $8.8 million in the prior year. From a balance sheet perspective, during the fourth quarter of 2022, we collected approximately $1 million of refundable Canadian tax credits. In addition, to date, since September 30, 2022, we have collected approximately $2.5 million from a lead customer. Approximately $1.5 million represented the accounts receivable at September 30, 2022, and the additional approximately $1 million related to shipments in September 2022, for which the company had deferred revenue recognition. The company expects to recognize the $1 million of revenue related to these shipments in the quarter ending March 31, 2023. As of today, the company has no past due amounts from this customer.

At December 31, 2022, we had 23,376,466 shares of common stock and exchangeable shares outstanding. This amount includes the 1.8 million shares subject to escrow as noted previously. Turning to our business outlook. We’ve entered the new year with a healthy order backlog from customers and a robust pipeline of new engagement opportunities, which we believe positions us for continued growth in 2023. Specific to the first quarter of 2023, the company expects total net revenue to be in the range of $4.7 million to $5 million, which, at the midpoint, would represent sequential growth of approximately 25% and year-over-year growth of more than 40%. This concludes our prepared remarks, and we will now open the call to questions. Operator, please initiate the Q&A session.

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Q&A Session

Operator: Thank you. Our first question comes from David Williams with Benchmark Company. Please proceed.

David Williams: Hey, good afternoon, gentlemen and congrats on the progress. It sounds like there is a lot of really exciting opportunities, and it’s good to see you guys capitalizing on that.

Ron Glibbery: Thanks, Dave.

David Williams: Yes. So maybe, Ron, first to you, just if you could talk a little bit about what you’re hearing from customers. And you gave some good commentary about your travels at Mobile World Congress and WISPAMERICA. Just can you elaborate a little bit just kind of what you’re hearing, what your customers are excited about and kind of how you think the market is developing overall just kind of based on your discussions with the industry?

Ron Glibbery: Well, to be quite frank, I mean, I would say the most exciting progress right now is on the fixed wireless market in the 60-gig space. And I mean, to that end, I think I was €“ we were a bit ambiguous in the conversation about engaging with wireless ISPs, for example. But now we’ve actually confirmed three separate meetings where they are coming to our headquarters to sit down with our engineers, and we’re going to map out road maps together. So we really believe that we’re going to become the dominant, if not already, the dominant players in that marketplace. And people traveling here just kind of prove that to me. And I think we’ve got a lot of education to do in terms of making sure that WISP understand that the real benefits.

And frankly, the real benefit, Dave, is the bandwidth, right? It’s just really coming down a bandwidth. And people €“ there is kind of past, I guess, almost expectations about mmWave with regards to range and so on. And I think what people are seeing now that it really, really works, so that was a big takeaway for us over the last few weeks. I think for 5G mmWave, look like it’s kind of as I’ve been predicting over the last year or so, which is okay. So 2022, for sure, was a major, major year for fixed wireless with the carriers let’s face it, but it was really mostly in C-band. But let’s face it over. So, two things came out of that for me. One is well there is really a demand for good internet service, right. So I mean, I think with 2 plus million customer adds, that’s clear.

But the other is that I think for the carriers, again, their revenue per bit is far greater on mobile, and we just see this broad shift happening later this year and into 2024, 2-millimeter wave as just part of that overall solution for their network, right. And really as a function of growth in demand, so probably my two big takeaways, we are in the unlicensed WISP market, really, I would say, our goal this year is to absolutely be the dominant player in that market. I think engaging directly with those wireless ISPs, face-to-face to share our respective roadmaps is critical in that regard. And on the carrier front, really that shift over €“ fixed wireless is clearly an important opportunity for them. The shift €“ we see that shift over mmWave later this year into 2024.

Dave?