When it comes to battery innovations, much attention gets paid to potential new chemistries and materials. Often overlooked is the importance of production processes for bringing down costs.
Now the MIT spinout 24M Technologies has simplified lithium-ion battery production with a new design that requires fewer materials and fewer steps to manufacture each cell. The company says the design, which it calls “SemiSolid” for its use of gooey electrodes, reduces production costs by up to 40 percent. The approach also improves the batteries’ energy density, safety, and recyclability.
Judging by industry interest, 24M is onto something. Since coming out of stealth mode in 2015, 24M has licensed its technology to multinational companies including Volkswagen, Fujifilm, Lucas TVS, Axxiva, and Freyr. Those last three companies are planning to build gigafactories (factories with gigawatt-scale annual production capacity) based on 24M’s technology in India, China, Norway, and the United States.
“The SemiSolid platform has been proven at the scale of hundreds of megawatts being produced for residential energy-storage systems. Now we want to prove it at the gigawatt scale,” says 24M CEO Naoki Ota, whose team includes 24M co-founder, chief scientist, and MIT Professor Yet-Ming Chiang.
Establishing large-scale production lines is only the first phase of 24M’s plan. Another key draw of its battery design is that it can work with different combinations of lithium-ion chemistries. That means 24M’s partners can incorporate better-performing materials down the line without substantially changing manufacturing processes.
The kind of quick, large-scale production of next-generation batteries that 24M hopes to enable could have a dramatic impact on battery adoption across society — from the cost and performance of electric cars to the ability of renewable energy to replace fossil fuels.
“This is a platform technology,” Ota says. “We’re not just a low-cost and high-reliability operator. That’s what we are today, but we can also be competitive with next-generation chemistry. We can use any chemistry in the market without customers changing their supply chains. Other startups are trying to address that issue tomorrow, not today. Our tech can address the issue today and tomorrow.”
A Simplified Design
Chiang, who is MIT’s Kyocera Professor of Materials Science and Engineering, got his first glimpse into large-scale battery production after co-founding another battery company, A123 Systems, in 2001. As that company was preparing to go public in the late 2000s, Chiang began wondering if he could design a battery that would be easier to manufacture.
“I got this window into what battery manufacturing looked like, and what struck me was that even though we pulled it off, it was an incredibly complicated manufacturing process,” Chiang says. “It derived from magnetic tape manufacturing that was adapted to batteries in the late 1980s.”
In his lab at MIT, where he’s been a professor since 1985, Chiang started from scratch with a new kind of device he called a “semi-solid flow battery” that pumps liquids carrying particle-based electrodes to and from tanks to store a charge.
In 2010, Chiang partnered with W. Craig Carter, who is MIT’s POSCO Professor of Materials Science and Engineering, and the two professors supervised a student, Mihai Duduta ’11, who explored flow batteries for his undergraduate thesis. Within a month, Duduta had developed a prototype in Chiang’s lab, and 24M was born. (Duduta was the company’s first hire.)
But even as 24M worked with MIT’s Technology Licensing Office (TLO) to commercialize research done in Chiang’s lab, people in the company including Duduta began rethinking the flow battery concept. An internal cost analysis by Carter, who consulted for 24M for several years, ultimately lead the researchers to change directions.
That left the company with loads of the gooey slurry that made up the electrodes in their flow batteries. A few weeks after Carter’s cost analysis, Duduta, then a senior research scientist at 24M, decided to start using the slurry to assemble batteries by hand, mixing the gooey electrodes directly into the electrolyte. The idea caught on.
The main components of batteries are the positive and negatively charged electrodes and the electrolyte material that allows ions to flow between them. Traditional lithium-ion batteries use solid electrodes separated from the electrolyte by layers of inert plastics and metals, which hold the electrodes in place.
Stripping away the inert materials of traditional batteries and embracing the gooey electrode mix gives 24M’s design a number of advantages.
For one, it eliminates the energy-intensive process of drying and solidifying the electrodes in traditional lithium-ion production. The company says it also reduces the need for more than 80 percent of the inactive materials in traditional batteries, including expensive ones like copper and aluminum. The design also requires no binder and features extra thick electrodes, improving the energy density of the batteries.
“When you start a company, the smart thing to do is to revisit all of your assumptions and ask what is the best way to accomplish your objectives, which in our case was simply-manufactured, low-cost batteries,” Chiang says. “We decided our real value was in making a lithium-ion suspension that was electrochemically active from the beginning, with electrolyte in it, and you just use the electrolyte as the processing solvent.”
In 2017, 24M participated in the MIT Industrial Liaison Program’s STEX25 Startup Accelerator, in which Chiang and collaborators made critical industry connections that would help it secure early partnerships. 24M has also collaborated with MIT researchers on projects funded by the Department of Energy.
Enabling the Battery Revolution
Most of 24M’s partners are eyeing the rapidly growing electric vehicle (EV) market for their batteries, and the founders believe their technology will accelerate EV adoption. (Battery costs make up 30 to 40 percent of the price of EVs, according to the Institute for Energy Research).
“Lithium-ion batteries have made huge improvements over the years, but even Elon Musk says we need some breakthrough technology,” Ota says, referring to the CEO of EV firm Tesla. “To make EVs more common, we need a production cost breakthrough; we can’t just rely on cost reduction through scaling because we already make a lot of batteries today.”
24M is also working to prove out new battery chemistries that its partners could quickly incorporate into their gigafactories. In January of this year, 24M received a grant from the Department of Energy’s ARPA-E program to develop and scale a high-energy-density battery that uses a lithium metal anode and semi-solid cathode for use in electric aviation.
That project is one of many around the world designed to validate new lithium-ion battery chemistries that could enable a long-sought battery revolution. As 24M continues to foster the creation of large scale, global production lines, the team believes it is well-positioned to turn lab innovations into ubiquitous, world-changing products.
“This technology is a platform, and our vision is to be like Google’s Android [operating system], where other people can build things on our platform,” Ota says. “We want to do that but with hardware. That’s why we’re licensing the technology. Our partners can use the same production lines to get the benefits of new chemistries and approaches. This platform gives everyone more options.”
SAN DIEGO, Oct. 26, 2022 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS), a leading National Security Solutions provider, announced today that it will publish financial results for the third quarter of 2022 after the close of market on Thursday, November 3rd. Management will discuss the Company’s operations and financial results in a conference call beginning at 2:00 p.m. Pacific (5:00 p.m. Eastern).
The call will be available at www.kratosdefense.com. Participants may register for the call using this Online Form. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN that can be used to access the call. For those who cannot access the live broadcast, a replay will be available on Kratos’ website.
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms and systems for United States National Security related customers, allies and commercial enterprises. Kratos is changing the way breakthrough technology for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training, combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.KratosDefense.com.
Michael Kupinski, Director of Research, Noble Capital Markets, Inc.
Patrick McCann, Research Associate, Noble Capital Markets, Inc.
Jacob Mutchler, Research Associate, Noble Capital Markets, Inc.
Refer to the bottom of the report for important disclosures
Overview. Develop a shopping list.This report focuses on the looming economic recession and how investors should position portfolios for the prospect of an economic recovery. But, a more important theme of this report is for investors not to look for the past leaders in the industry as the best way to play a rebound. In this report, we look beyond a rebound play and focus on our favorite growth plays.
Digital Media: The smaller beat the goliaths.Two of our current favorites in the AdTech and MarTech industries performed better than most of its respective peers in the quarter. Can the momentum continue?
Television Broadcasting: Will political carry the quarter? With signs of weakening National advertising, broadcasters are looking forward toward Q4 Political as an offset. Political advertising, however, is not usually evenly spent across all markets. There may be winners and some losers.
Radio Broadcasting: Polishing its tarnished image.One of the epic fails of the radio industry has been Audacy, once one of the leadership companies of the industry. The AUD shares are down a staggering 95% from highs in March 2021. New industry leaders are emerging and they are not focused on radio. We highlight a few of our current favorites.
Publishing: Once a leader, now a loser.It is hard to believe that Gannett was once a $90 stock and held a record for one of the longest strings of quarterly earnings gains in the S&P 500 Index. The shares are down 80% from year earlier highs to near $1.37. We believe that investors should take a look at a company that has developed into an impressive Digital Media publisher.
Overview
Develop A Shopping List
The best time to buy stocks is typically in the midst of an economic recession. Investors begin to look beyond the economic weakness and begin positioning portfolios for an economic rebound. The hard part is determining when the economy is in the middle of the downturn. It appears by all standard definitions of an economic downturn that the U.S. is in an economic recession. But, how long will a downturn last? Should investors try to be cute to predict the midpoint of the downturn?
Many economic pundits paint the current state of the economy against the canvas of the 1970s, a period of high inflation and low economic growth. There are many similarities. The Federal Reserve in the early 70s was willing to provide cheap money to fuel the economy, without much concern about inflation. In the second half of the 70s, the economy was rocked by fuel supply shortages and high inflation. During the Covid pandemic, both fiscal and monetary policy was designed to provide liquidity and to make sure that people were able to pay their bills during the economic lockdowns. This had the affect of increasing personal income, even though GDP declined 31.4% in 2020. As the economy reopened, there was significant demand for goods and services, some of which were in short supply because of the previous and recurring economic lock downs. Simplistically, this fueled inflation, high demand with a consumer that had disposable income and limited supply.
As Figure #1 Early 1970s chart illustrates, the US economy grew 9.8%, as measured by real GDP, from January 1972 to September 1975. Notably, the stock market, as measured by the S&P 500 Index, declined a significant 18.6%. This was a period marked by rising inflation due to government spending. The inflation rate, as measured by the US Bureau of Labor Statistics, was a reasonable 3.3% in 1972, but increased to 11.1% in 1974 and then moderated slightly to 9.1% in 1975. The inflation rate remained above 5% for the following 3 years.
Figure #1 Early 1970s
Source: US Bureau of Economic Analysis and Yahoo Finance.
Given the current state of rising energy prices, many pundits paint the current US economic plight similar to the period of fuel shortages of the late 1970s. As Figure #2 Late 1970s illustrates, the US economy, as measured by real GDP, grew 13.5% from January 1977 to October 1981, an average of slightly more than 3% per year. Notably, inflation increased significantly, from 6.5% in 1977 to 11.3% in 1979, followed by 13.5% in 1980, and 10.3% in 1981. The stock market, as measured by the S&P 500 Index, did not react well, up 9.3% from January 1977 to October 1981, an average of 2.3% growth.
Figure #2 Late 1970s
Source: US Bureau of Economic Analysis and Yahoo Finance.
So, where are we now? In the present, the Covid induced government spending and stimulus related fiscal policy, large spending on the Ukraine war, and a Fed unwilling to rein in early signs of inflation has put the US in a dire economic position. Certainly, supply chain shortages contributed to the current rise in inflation, as well. The Fed now appears to have religion on inflation and is aggressively raising interest rates. The Fed indicated that it is willing to create economic pain to arrest inflationary pressures. Most certainly this will cause additional economic weakness. The stock market in the near to intermediate term will need to digest the likelihood of weakening corporate profits, as well. Furthermore, as it relates to the equity markets, other investment classes, such as bonds, may become more appealing, taking demand from the stock market.
We believe that arresting inflation would set a favorable trajectory for the stock market, as investors position for the prospect of an economic recovery. To some degree, the 24.4% drop in the stock market, as measured by the S&P 500 index, from January 2022 to near current levels, anticipate some of the headwinds for investors described earlier in this report, including weakening corporate profits, the prospect of a further weakened US, and, even global economy, a move toward other investment classes, and stubborn inflation. What is different this time is that the Fed now appears to be aggressively tackling inflation. As such, the 47% drop in the stock market from highs in 1973 to the low in 1974 may not be a prelude to the current environment. It was a different Fed and it took different actions.
We encourage a different approach than trying to time the market. Our advice is for investors to develop a shopping list and begin accumulating. But, be selective.
We believe that the leadership companies of the past economic downturns are not likely to be the best positioned for the looming economic downturn or the recovery. Many of the larger cap names in each sector have fallen on hard times. This is discussed more fully in the following sector reports. Those that appear to be well positioned are companies that have diversified revenue streams, transitioned to faster growth digital businesses, and pared down debt. We encourage investors to focus on these companies given the prospect of faster revenue and cash flow growth coming out of the possible recession. Some of our current favorites include Entravision, Townsquare Media, Salem Media, Harte Hanks, Direct Digital, and Lee Enterprises. These companies are discussed in the following sector summaries.
Internet & Digital Media
Internet and Digital Media stocks declined for the fourth consecutive quarter in a row, as Figure #3 Internet & Digital Media Stock Performance illustrates. It wasn’t all bad, as Noble’s Ad Tech Index outperformed the general market, as measured by the S&P 500 Index, up +7%. Comparatively, the S&P 500 Index decreased by 5%. Figure #4 Internet & Digital Media Q3 Performance reflects the outperformance of the AdTech sector. AdTech also materially outperformed Noble’s other Internet & Digital Media subsectors, including Noble’s Digital Media Index (-10%); Social Media Index (-15%) and MarTech Index (-16%). Notably, some of our closely followed companies significantly outperformed the respective peer group and outperformed the general market, discussed later in this report.
Figure #3 Internet & Digital Media LTM Stock Performance
Source: Capital IQ
Figure #4 Internet & Digital Media Q3 Stock Performance
Source: Capital IQ
Marketing Technology
Harte Hanks shines in MarTech
The worst performing sector was the MarTech sector, which is also the least profitable sector. This likely explains the sector’s underperformance. Only 4 of the 24 companies we monitor in this sector generate positive EBITDA, and investors migrated away from unprofitable growth stocks towards more profitable companies or defensive sectors that might withstand a recession better. Investors would clearly like to see companies in this sector accelerate their path to profitability, and most companies in the sector are responding accordingly. To be fair, some of the companies that aren’t EBITDA positive do generate positive cash flow from operations, which is a quirk of SaaS software accounting. Of the two dozen companies in this sector, the only stock that was up during the quarter was Harte-Hanks (HHS), whose shares increased by 68%. HHS continues to generate improved operating results while lowering its debt and pension obligations.
MarTech stocks have also been victims of their own success. Earlier this year the group traded at average revenue and EBITDA multiples of 8.5x and 70.8x, respectively. Today the same group trades at average revenue and EBITDA multiples of 4.5x and 30.1x, respectively. Stocks like Shopify (SHOP), and Hubspot (HUBS) entered the year trading at 22.2x and 14.7x 2022E revenues, respectively, and now trade at 5.3x, and 7.7x, respectively. Some of this appears to be a Covid-related hangover: when Covid hit, retail companies needed to emphasize their online channels, and companies like Shopify benefited. As consumers return to stores, growth has moderated. Shopify aside, the broader message investors seem to be sending is that recurring revenues are great, but not if they are paired with EBITDA losses at a time when economy appears to be heading into a potential recession.
As Figure #5 Marketing Tech Comparables illustrate, the shares of Harte Hanks is among the cheapest in the sector, currently trading at 5.1 times Enterprise Value to our 2023 adj. EBITDA estimate. We believe that the modest stock valuation relative to peers, currently trading on average at 12.9 times, illustrates the head room for the stock in spite of the 68% move in the latest quarter. The shares of HHS continue to be among our favorites in the sector.
Figure #5 Marketing Tech Comparables
Source: Eikon, Company filings and Nobles estimates
Advertising Technology
Direct Digital exceeds peers
Noble’s AdTech Index was the worst performing Index of the group in the second quarter when it was down 39%. As such, it was nice to see a better performance in the third quarter. In addition, Noble Indices are market cap weighted, and we attribute the relative strength of the Ad Tech Index to the performance of The Trade Desk (TTD), the Ad Tech sectors largest market cap company, whose shares were up 42% during the quarter. Other notable performers were Digital Media Solutions (DMS; +73%) which announced a deal to be taken private, and Zeta Global (ZETA; +46%), whose 2Q results significantly exceeded guidance. Despite the relative strength of the sector, returns were not broad-based: only 9 of the 23 stocks in the Ad Tech sector were up during the quarter.
One of our closely followed companies, Direct Digital (DRCT) had a strong performance, up 75% in the quarter. The company’s second quarter exceeded expectations and the company raised full year 2022 revenue and cash flow guidance by a significant 40%. The company appears to be bucking the downward trend in National advertising, which is reflected in its peer group quarterly performance.
As Figure #6 Advertising Tech Comparables illustrate, Direct Digital Holdings is trading near the averages in terms of Enterprise Value to the 2023 adj. EBITDA estimate. We would note that this valuation is low considering that the company is outperforming its peers. As such, we believe that there is a valuation gap and we continue to view DRCT shares as among our favorites.
Figure #6 Advertising Tech Comparables
Source: Eikon, Company filings and Nobles estimates
Traditional Media
Downward trends, but some bright spots
The Traditional Media stocks have had tough sledding this year. As Figure #7 Traditional Media LTM Stock Performance illustrates, all of Noble’s Traditional Media Indices have declined over the past 12 months and each have underperformed the general market. The downward spiral seemed to have moderated somewhat in the third quarter.
Notably, during the third quarter, many of the stocks had a very nice bounce before resuming a downward trend, as Figure #8 Traditional Media Q3 Stock Performance illustrates. At one point in the latest quarter, stocks were up as high as 30% from the second quarter end. It is important to note that only the Publishing stocks outperformed the general market in the latest quarter. A description of the traditional media sectors follow with our favorite picks for the upcoming quarter and year.
Figure #7 Traditional Media LTM Stock Performance
Source: Capital IQ
Figure #8 Traditional Media Q3 Stock Performance
Source: Capital IQ
Television Broadcasting
Noble’s TV Index dropped 10.1% in the third quarter, underperforming the broader market (-5.3%), illustrated in Figure #8 Traditional Media Q3 Stock Performance. As we indicated in our previous quarterly report, we believe that there would be a trading opportunity in the media stocks. The latest quarter stock performance indicated that. Many of the TV stocks had a strong performance from the end of the second quarter (June 30) to highs achieved in August. Many of the TV stocks increased a strong 25% on average. It is instructive to know that E.W. Scripps had the largest advance from June 30 lows, up 31% to highs achieved August 16. When the industry is in favor, the shares of E.W. Scripps tends to outperform its industry peers. The shares of Entravision (EVC) were the next best performing within the quarter, up 30%, before trading lower and ending down 12%.
The TV stocks were challenged by macro economic pressures such as inflation, rising cost of borrowing, and a Fed determined to curb inflation by slowing the economy. In the end, interest rate increases by the Fed curbed enthusiasm for TV stocks and the Noble TV Index ended the third quarter down.
As Figure #9 Q2 YOY Revenue Growth illustrates, the average television company reported 11.1% revenue growth in the latest quarter. Most broadcasters were very optimistic about Political advertising, with some raising forecasts to be near the levels of the Presidential election, a highwater mark. We would note that Entravision had the highest revenue performance in the quarter, up 24%, as the company continues to benefit from its transition toward faster growth Digital, which now accounts for over 80% of its total company revenues.
Industry adj. EBITDA margins were healthy, as Figure #10 Q2 EBITDA margins illustrate, with the average margin for the industry at 25.5%. It is notable to mention that Entravision margins appear to be significantly below that of the industry at 10.1%. Its Digital business is a rep business, and, as such, the company reports revenues on a net basis and not gross revenues. While a rep business tends to be a lower margin business, the reporting of rep revenues gives the appearance of very low margins. The company is in a strong cash flow and free cash flow position.
Most companies will be reporting third quarter financial results in the first two weeks in November. We believe that the third quarter will reflect an influx of Political advertising, even though the lion’s share of the Political advertising likely will fall in the fourth quarter. Consequently, we believe that the third quarter revenue growth will be better than the second quarter, showing some acceleration. With signs of weakening National advertising, and a likely weakening Local advertising environment in some larger markets, broadcasters are looking forward toward Q4 Political as an offset. Many broadcasters indicated that Political advertising may be at record levels in 2022, even higher than the Presidential election year of 2020. Political advertising, however, is not usually evenly spent across all markets. As such, there may be winners and some disappointment.
Investors are not encouraged to buy a Television broadcaster on the basis of the upcoming fourth quarter Political advertising influx. There are broader issues at play, like cord cutting, slowing Retransmission revenue growth, and the prospect for a weakening economy. We believe broadcasters with minimal emphasis on National advertising, a larger focus on small to medium size markets and local advertising, are best positioned to weather an economic downturn. We also like companies that do not have high debt leverage. In addition, we like diversified companies that can benefit from cord cutting, like E.W. Scripps, or have diversified revenue streams and large fast growing digital businesses, like Entravision. As Figure #11 TV Industry Comparables illustrate, the shares of Entravision are among the cheapest in the industry and the EVC shares leads our favorites in the industry.
Figure #9 TV Industry Q2 YoY Revenue Growth
Source: Eikon and Company filings
Figure #10 TV Industry Q2 EBITDA Margins
Source: Eikon and Company filings
Figure #11 TV Industry Comparables
Source: Eikon, Company filings and Nobles estimates
Radio Broadcasting
Polishing its tarnished image
One of the epic fails of the radio industry has been Audacy, once one of the leadership companies in the industry. The AUD shares are down a staggering 95% from highs in March 2021. The poor stock performance reflects the poor revenue and cash flow performance and high debt levels at the company. Recently, the company announced that it plans to sell some of its prized assets, including its podcasting business, Cadence 13, in an effort to more aggressively pare down debt. While Audacy struggles, there are emerging leaders in the industry, many that are not focused on its radio business, discussed later in this report.
As Figure #12 Radio Industry Q2 YoY Revenue Growth chart illustrates, the average radio revenue grew 8.9%. Companies that were at the top of the list of revenue growth had diversified revenue streams. Townsquare Media was the best performer, with Q2 revenue growth of 13.6%. We believe that Townsquare also benefits from significantly lower National advertising and concentration on less cyclical larger markets. Other diversified companies that performed better than the lower growth companies in the group were Salem Media and Beasley Broadcasting. Salem Media has diversified into content creation and digital media and Beasley recently accelerated its push into Digital Media. Separately, Beasley recently announced a station swap with Audacy, which will enhance its position with its four existing stations in Las Vegas.
On the margin front, Townsquare Media also was among the leaders in the industry. Notably, Townsquare Media’s digital business carries margins similar to its Radio businesses, near 30%. As such, its investments in Digital Media are not depressing its total company margins. As Figure #13 Q2 Radio Industry EBITDA Margins illustrate, Townsquare’s Q2 adj. EBITDA margins were 26.6%, well above that of the larger industry peers like iHeart (24.9%), Cumulus Media (19.2%), and Audacy (12.0%).
In looking forward toward the upcoming third quarter results, which will be released in coming weeks, we believe that the effects of rising inflation and weakening economy will start to show. Many of the larger broadcasters which focus on larger markets, have national network business, may disappoint. In addition, we believe that there will be spotty Political advertising performances. In our view, the resulting potential weakness in the stocks may create an opportunity to more aggressively accumulate or establish positions.
Radio stocks largely mirrored the performance of the TV industry, falling 9% in the third quarter, illustrated above, in Figure #8 Traditional Media Q3 Stock Performance. Last quarter we pointed out that large industry players such as Audacy and iHeart had an outsized negative impact on the market cap-weighted index. This was due to the stocks being downgraded by a Wal Street firm on the basis of high leverage in a time of recession.
However, there are several broadcasters in the Radio industry with improving leverage profiles. Furthermore, we believe that in a time when traditional radio companies are making a transition to more digitally based revenue sources, investors would do well to differentiate among them on that basis as well. In our view, certain companies are ahead of peers in the digital transformation and are better shielded from certain fundamental headwinds that have traditionally plagued radio broadcasters in prior recessions. We encourage investors to focus on Townsquare Media (TSQ), Salem Media (SALM), and Beasley Broadcasting (BBGI). As Figure #14 Radio Industry Comparables highlights, Townsquare Media, Cumulus Media, and Salem Media are among the cheapest in the group.
Figure #12 Radio Industry Q2 YoY Revenue Growth
Source: Eikon and Company filings
Figure #13 Q2 Radio Industry EBITDA Margins
Source: Eikon and Company filings
Figure #14 Radio Industry Comparables
Source: Eikon, Company filings and Nobles estimates
Publishing
Once a leader, now a loser
It is hard to believe that Gannett was once a $90 stock and held a record for one of the longest strings of quarterly earnings gains in the S&P 500 Index. The shares are down 80% from year earlier highs to near $1.37. For some anti newspaper investors, this is a “told you so” moment. But, this view missed notable exceptions, like the New York Times, which seemed to transition more quickly toward Digital revenues. There are publishers that are set apart from the weak trends at Gannett and are on a favorable trajectory toward a Digital future. As such, we believe that investors should not throw the baby out with the bathwater or avoid the industry. There are gems here, which is discussed later in this report.
There were sizable differences in the financial performance of the companies in the publishing group. As Figure #15 Publishing Industry Q2 YoY Revenue Performance chart illustrates, Q2 publishing revenue declined on average 1.5%. The notable exceptions to this performance was The New York Times, up 11.5%, News Corp, up 7.3%, and Lee Enterprises, down a modest 0.7%. The improved performance into the ranks of the leaders in the industry is quite notable. Lee’s digital subscriptions currently lead the industry. The company has exceeded all of its peers in terms of digital subscription growth in the past 11 consecutive quarters. Furthermore, over 50% of its advertising is derived from digital. Currently, roughly 30% of the company total revenues are derived from Digital, still short of the 55% at The New York Times, but closing the gap.
Not only is Lee performing well on the Digital revenue front, it has industry leading margins. As Figure #16 Q2 Publishing Industry EBITDA Margins illustrates, Lee’s Q2 EBITDA margins were 11.8%, in line with News Corp and second only to the New York Times at 17.4%. We believe that margins should improve over time as the company continues to migrate toward a higher digital margin business model.
Illustrated above in Figure #8 Traditional Media Q3 Stock Performance is Noble’s Publishing Index, which decreased a modest 2.4% in the quarter, outperforming the S&P (-5.3%). The relatively favorable performance of the index was primarily due to its largest constituents, News Corp. and The New York Times, which rebounded from -29.7% and -39.1%, respectively in Q2, to -3% and +3%, respectively, in Q3. The average percentage change of the stocks in the industry was -16.2%, more in line with Traditional Media as a whole. One of the poor performing stocks in the index for the quarter was Gannett (GCI) which declined 47%. It was recently reported that the company implemented austerity measures included unpaid leave and voluntary layoffs. In the case of Lee Enterprises, the shares were down a much more modest 7%, more in line with the general market. In our view, the company is expected to report favorable third quarter results and the shares are undervalued.
As Figure #17 Publishing Industry Comparables chart illustrates, the LEE shares trade at an average industry multiple of 5.8 times Enterprise Value to our 2023 adj. EBITDA estimate. Notably, the company is closing the gap with its Digital Media revenue contribution to that of New York Times, which is currently trading at an estimated 14.5 times EV to 2023 adj. EBITDA. We believe that the valuation gap with the New York Times should close as well. In recent Lee Enterprise news, a buyout specialist investor filed a 13D and indicated interest in taking the company private.While financial players continue to circle the wagons for Lee, we believe that investors should take note. In our view, the LEE shares are compelling and offer a favorable risk/reward relationship.
Figure #15 Publishing Industry Q2 YoY Revenue Growth
Source: Eikon and Company filings
Figure #16 Q2 Publishing Industry EBITDA Margins
Source: Eikon and Company filings
Figure #17 Publishing Industry Comparables
Source: Eikon, Company filings and Nobles estimates
Reports with important disclosure information of companies highlighted in this report may be found here:
All statements or opinions contained herein that include the words “we”, “us”, or “our” are solely the responsibility of Noble Capital Markets, Inc.(“Noble”) and do not necessarily reflect statements or opinions expressed by any person or party affiliated with the company mentioned in this report. Any opinions expressed herein are subject to change without notice. All information provided herein is based on public and non-public information believed to be accurate and reliable, but is not necessarily complete and cannot be guaranteed. No judgment is hereby expressed or should be implied as to the suitability of any security described herein for any specific investor or any specific investment portfolio. The decision to undertake any investment regarding the security mentioned herein should be made by each reader of this publication based on its own appraisal of the implications and risks of such decision.
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IMPORTANT DISCLOSURES
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HOUSTON, Oct. 13, 2022 /PRNewswire/ — Direct Digital Holdings, Inc. (Nasdaq: DRCT) (“Direct Digital Holdings” or the “Company”), a leading advertising and marketing technology platform through its operating companies Colossus Media, LLC, (“Colossus SSP”) Huddled Masses LLC (“Huddled Masses”) and Orange142, LLC (“Orange 142”), today announced that it will report financial results for the third quarter 2022 on November 10, 2022. Management will discuss the results via webcast after market close.
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage approximately 90,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app and other media channels. The company has been named a top minority-owned business by The Houston Business Journal.
A growing number of people are living with conditions that could benefit from physical rehabilitation — but there aren’t enough physical therapists (PTs) to go around. The growing need for PTs is racing alongside population growth, and aging, as well as higher rates of severe ailments, are contributing to the problem.
An upsurge in sensor-based techniques, such as on-body motion sensors, has provided some autonomy and precision for patients who could benefit from robotic systems to supplement human therapists. Still, the minimalist watches and rings that are currently available largely rely on motion data, which lack more holistic data a physical therapist pieces together, including muscle engagement and tension, in addition to movement.
This muscle-motion language barrier recently prompted the creation of an unsupervised physical rehabilitation system, MuscleRehab, by researchers from MIT’s Computer Science and Artificial Intelligence Laboratory (CSAIL) and Massachusetts General Hospital. There are three ingredients: motion tracking that captures motion activity, an imaging technique called electrical impedance tomography (EIT) that measures what the muscles are up to, and a virtual reality (VR) headset and tracking suit that lets a patient watch themselves perform alongside a physical therapist.
Patients put on the sleek ninja-esque all-black tracking suit and then perform various exercises such as lunges, knee bends, dead lifts, leg raises, knee extensions, squats, fire hydrants, and bridges that measure activity of quadriceps, sartorius, hamstrings, and abductors. VR captures 3D movement data.
In the virtual environment, patients are given two conditions. In both cases, their avatar performs alongside a physical therapist. In the first situation, just the motion tracking data is overlaid onto their patient avatar. In the second situation, the patient puts on the EIT sensing straps, and then they have all the information of the motion and muscle engagement.
With these two conditions, the team compared the exercise accuracy and handed the results to a professional therapist, who explained which muscle groups were supposed to be engaged during each of the exercises. By visualizing both muscle engagement and motion data during these unsupervised exercises instead of just motion alone, the overall accuracy of exercises improved by 15 percent.
The team then did a cross-comparison of how much time during the exercises the correct muscle group got triggered between the two conditions. In the condition where they show the muscle engagement data in real-time, that’s the feedback. By monitoring and recording the most engagement data, the PTs reported a much better understanding of the quality of the patient’s exercise, and that it helped to better evaluate their current regime and exercise based on those stats.
“We wanted our sensing scenario to not be limited to a clinical setting, to better enable data-driven unsupervised rehabilitation for athletes in injury recovery, patients currently in physical therapy, or those with physical limiting ailments, to ultimately see if we can assist with not only recovery, but perhaps prevention,” says Junyi Zhu, MIT PhD student in electrical engineering and computer science, CSAIL affiliate, and lead author on a new paper about MuscleRehab. “By actively measuring deep muscle engagement, we can observe if the data is abnormal compared to a patient’s baseline, to provide insight into the potential muscle trajectory.”
Current sensing technologies focus mostly on tracking behaviors and heart rates, but Zhu was interested in finding a better way than electromyography (EMG) to sense the engagement (blood flow, stretching, contracting) of different layers of the muscles. EMG only captures muscle activity right beneath the skin, unless it’s done invasively.
Zhu has been digging into the realm of personal health-sensing devices for some time now. He’d been inspired by using EIT, which measures electrical conductivity of muscles, for his project in 2021 that used the noninvasive imaging technique to create a toolkit for designing and fabricating health and motion sensing devices. To his knowledge, EIT, which is usually used for monitoring lung function, detecting chest tumors, and diagnosing pulmonary embolism, hadn’t been done before.
With MuscleRehab, the EIT sensing board serves as the “brains” behind the system. It’s accompanied by two straps filled with electrodes that are slipped onto a user’s upper thigh to capture 3D volumetric data. The motion capturing process uses 39 markers and a number of cameras that sense very high frame rates per second. The EIT sensing data shows actively triggered muscles highlighted on the display, and a given muscle becomes darker with more engagement.
Currently, MuscleRehab focuses on the upper thigh and the major muscle groups inside, but down the line they’d like to expand to the glutes. The team is also exploring potential avenues in using EIT in radiotherapy in collaboration with Piotr Zygmanski, medical physicist at the Brigham and Women’s Hospital and Dana-Farber Cancer Institute and Associate Professor of Radiation at Harvard Medical School.
“We are exploring utilization of electrical fields and currents for detection of radiation as well as for imaging of the of dielectric properties of patient anatomy during radiotherapy treatment, or as a result of the treatment,” says Zygmanski. “Radiation induces currents inside tissues and cells and other media — for instance, detectors — in addition to making direct damage at the molecular level (DNA damage). We have found the EIT instrumentation developed by the MIT team to be particularly suitable for exploring such novel applications of EIT in radiotherapy. We are hoping that with the customization of the electronic parameters of the EIT system we can achieve these goals.”
“This work advances EIT, a sensing approach conventionally used in clinical settings, with an ingenious and unique combination with virtual reality,” says Yang Zhang, assistant professor in electrical and computer engineering at the UCLA Samueli School of Engineering, who was not involved in the paper. “The enabled application that facilitates rehabilitation potentially has a wide impact across society to help patients conduct physical rehabilitation safely and effectively at home. Such tools to eliminate the need for clinical resources and personnel have long been needed for the lack of workforce in healthcare.”
Nobel-Winning Quantum Weirdness Undergirds an Emerging High-Tech Industry, Promising Better Ways of Encrypting Communications and Imaging Your Body
Two quantum particles, like pairs of atoms or photons, can become entangled. That means a property of one particle is linked to a property of the other, and a change to one particle instantly affects the other particle, regardless of how far apart they are. This correlation is a key resource in quantum information technologies.
For the most part, quantum entanglement is still a subject of physics research, but it’s also a component of commercially available technologies, and it plays a starring role in the emerging quantum information processing industry.
Pioneers
The 2022 Nobel Prize in Physics recognized the profound legacy of Alain Aspect of France, John F. Clauser of the U.S. and Austrian Anton Zeilinger’s experimental work with quantum entanglement, which has personally touched me since the start of my graduate school career as a physicist. Anton Zeilinger was a mentor of my Ph.D. mentor, Paul Kwiat, which heavily influenced my dissertation on experimentally understanding decoherence in photonic entanglement.
Decoherence occurs when the environment interacts with a quantum object – in this case a photon – to knock it out of the quantum state of superposition. In superposition, a quantum object is isolated from the environment and exists in a strange blend of two opposite states at the same time, like a coin toss landing as both heads and tails. Superposition is necessary for two or more quantum objects to become entangled.
Entanglement Goes the Distance
Quantum entanglement is a critical element of quantum information processing, and photonic entanglement of the type pioneered by the Nobel laureates is crucial for transmitting quantum information. Quantum entanglement can be used to build large-scale quantum communications networks.
On a path toward long-distance quantum networks, Jian-Wei Pan, one of Zeilinger’s former students, and colleagues demonstrated entanglement distribution to two locations separated by 764 miles (1,203 km) on Earth via satellite transmission. However, direct transmission rates of quantum information are limited due to loss, meaning too many photons get absorbed by matter in transit so not enough reach the destination.
Entanglement is critical for solving this roadblock, through the nascent technology of quantum repeaters. An important milestone for early quantum repeaters, called entanglement swapping, was demonstrated by Zeilinger and colleagues in 1998. Entanglement swapping links one each of two pairs of entangled photons, thereby entangling the two initially independent photons, which can be far apart from each other.
Quantum Protection
Perhaps the most well known quantum communications application is Quantum Key Distribution (QKD), which allows someone to securely distribute encryption keys. If those keys are stored properly, they will be secure, even from future powerful, code-breaking quantum computers.
While the first proposal for QKD did not explicitly require entanglement, an entanglement-based version was subsequently proposed. Shortly after this proposal came the first demonstration of the technique, through the air over a short distance on a table-top. The first demonstrations of entangement-based QKD were published by research groups led by Zeilinger, Kwiat and Nicolas Gisin were published in the same issue of Physical Review Letters in May 2000.
These entanglement-based distributed keys can be used to dramatically improve the security of communications. A first important demonstration along these lines was from the Zeilinger group, which conducted a bank wire transfer in Vienna, Austria, in 2004. In this case, the two halves of the QKD system were located at the headquarters of a large bank and the Vienna City Hall. The optical fibers that carried the photons were installed in the Vienna sewer system and spanned nine-tenths of a mile (1.45 km).
This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Nicholas Peters, Joint Faculty, University of Tennessee.
Entanglement for Sale
Today, there are a handful of companies that have commercialized quantum key distribution technology, including my group’s collaborator Qubitekk, which focuses on an entanglement-based approach to QKD. With a more recent commercial Qubitekk system, my colleagues and I demonstrated secure smart grid communications in Chattanooga, Tennessee.
Quantum communications, computing and sensing technologies are of great interest to the military and intelligence communities. Quantum entanglement also promises to boost medical imaging through optical sensing and high-resolution radio frequency detection, which could also improve GPS positioning. There’s even a company gearing up to offer entanglement-as-a-service by providing customers with network access to entangled qubits for secure communications.
There are many other quantum applications that have been proposed and have yet to be invented that will be enabled by future entangled quantum networks. Quantum computers will perhaps have the most direct impact on society by enabling direct simulation of problems that do not scale well on conventional digital computers. In general, quantum computers produce complex entangled networks when they are operating. These computers could have huge impacts on society, ranging from reducing energy consumption to developing personally tailored medicine.
Finally, entangled quantum sensor networks promise the capability to measure theorized phenomena, such as dark matter, that cannot be seen with today’s conventional technology. The strangeness of quantum mechanics, elucidated through decades of fundamental experimental and theoretical work, has given rise to a new burgeoning global quantum industry.
Ark Invest’s New Disruptive Technology Fund has a Unique Value Proposition
Not all companies worth owning are publicly traded. Yet, many still need capital, and some could serve smaller investors well. Cathie Wood’s latest fund, which launched on September 27, is intended to bring venture investing to those with $500 or more to invest. The focus is on private companies.
The fund’s launch is on a platform provided by Titan which itself is a young disruptive company, providing advantages to many investors and potentially disrupting the old methods.
About the Fund
The Ark Venture fund will be an interval fund. This means it is a closed-end fund that doesn’t trade on a stock exchange. Interval fund restrictions are most often used when many of the holdings in a fund are illiquid (i.e., don’t trade on the open market). The restrictions make it easier for the fund to focus on return without worrying about managing inflows and outflows.
The ARK Venture Fund will invest in early to late-stage private tech companies and venture capital funds. Public tech companies are also permitted. Access to the fund investments will occur on Titan. Titan is a disruptive platform on phone apps and tablets that allows investors to curate strategies created and managed by popular investors.
As with other Ark Invest funds, the fund’s investment theme is disruptive innovation. ARK defines “disruptive innovation” as the introduction of a technologically enabled new product or service that potentially changes the way the world works. The platform Titan itself is an example of disruptive technology.
Image Source: Titan.com
About Titan
The first thing you see on Titan’s home page is a line that reads, “Investment management, made modern.” It invites you to use its platform to, “Build a portfolio of managed stocks, crypto, real estate, private credit, venture capital & more.”
The innovative idea behind Titan is it uses technology to provide an investment platform that enables individuals to orchestrate a portfolio made up of “titans”: a set of curated investment strategies, spanning public equities to real estate to credit to crypto, each created and managed by professionals or “titans” like the CIO of ARK Invest.
The overriding purpose of Titan is to provide access to investments retail investors had been held away from.
About Venture Capital
Venture capital is a form of non-public capital provided to companies by investors that have enough confidence in management and the company’s business model to expect above-average earnings. Because these companies don’t trade on public exchanges, investments, usually from family offices, well-off investors, and investment banks, have been the traditional sources of capital.
Though it is deemed risky for investors to commit funds to VC, the potential for above-average returns is an attractive inducement for investors. For new companies or ventures that have a limited operating history, this is the market they often turn to.
Take Away
ARK’s step into less-liquid assets departs from Wood’s earlier strategies, the success of which elevated her to all-star investor status as the value of ARK ETFs like the ARK Innovation ETF (ARKK) soared last year. ARKK has plummeted 60% so far in 2022, a much steeper decline than the 21% decline in the S&P-500-tracking ETF, the SPDR S&P 500 ETF Trust (SPY).
ARK has struggled on offerings this year. The firm announced the closure of its Transparency ETF (CTRU) at the end of July, and its eight remaining ETFs, including the ARK Innovation ETF (ARKK) have dramatically underperformed broader markets.
Related Information
Information on private offerings available through Noble Capital Markets may be available to you. Are you a qualified investor? Learn more by going here and discovering the various qualifiers and what may be obtainable by you.
Deepfake Audio Has a Tell – Researchers Use Fluid Dynamics to Spot Artificial Imposter Voices
Imagine the following scenario. A phone rings. An office worker answers it and hears his boss, in a panic, tell him that she forgot to transfer money to the new contractor before she left for the day and needs him to do it. She gives him the wire transfer information, and with the money transferred, the crisis has been averted.
The worker sits back in his chair, takes a deep breath, and watches as his boss walks in the door. The voice on the other end of the call was not his boss. In fact, it wasn’t even a human. The voice he heard was that of an audio deepfake, a machine-generated audio sample designed to sound exactly like his boss.
Attacks like this using recorded audio have already occurred, and conversational audio deepfakes might not be far off.
Deepfakes, both audio and video, have been possible only with the development of sophisticated machine learning technologies in recent years. Deepfakes have brought with them a new level of uncertainty around digital media. To detect deepfakes, many researchers have turned to analyzing visual artifacts – minute glitches and inconsistencies – found in video deepfakes.
Audio deepfakes potentially pose an even greater threat, because people often communicate verbally without video – for example, via phone calls, radio and voice recordings. These voice-only communications greatly expand the possibilities for attackers to use deepfakes.
To detect audio deepfakes, we and our research colleagues at the University of Florida have developed a technique that measures the acoustic and fluid dynamic differences between voice samples created organically by human speakers and those generated synthetically by computers.
Organic vs. Synthetic voices
Humans vocalize by forcing air over the various structures of the vocal tract, including vocal folds, tongue and lips. By rearranging these structures, you alter the acoustical properties of your vocal tract, allowing you to create over 200 distinct sounds, or phonemes. However, human anatomy fundamentally limits the acoustic behavior of these different phonemes, resulting in a relatively small range of correct sounds for each.
In contrast, audio deepfakes are created by first allowing a computer to listen to audio recordings of a targeted victim speaker. Depending on the exact techniques used, the computer might need to listen to as little as 10 to 20 seconds of audio. This audio is used to extract key information about the unique aspects of the victim’s voice.
The attacker selects a phrase for the deepfake to speak and then, using a modified text-to-speech algorithm, generates an audio sample that sounds like the victim saying the selected phrase. This process of creating a single deepfaked audio sample can be accomplished in a matter of seconds, potentially allowing attackers enough flexibility to use the deepfake voice in a conversation.
This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Logan Blue, PhD student in Computer & Information Science & Engineering, University of Florida and Patrick Traynor, Professor of Computer and Information Science and Engineering, University of Florida.
Detecting Audio Deepfakes
The first step in differentiating speech produced by humans from speech generated by deepfakes is understanding how to acoustically model the vocal tract. Luckily scientists have techniques to estimate what someone – or some being such as a dinosaur – would sound like based on anatomical measurements of its vocal tract.
We did the reverse. By inverting many of these same techniques, we were able to extract an approximation of a speaker’s vocal tract during a segment of speech. This allowed us to effectively peer into the anatomy of the speaker who created the audio sample.
Deepfaked audio often results in vocal tract reconstructions that resemble drinking straws rather than biological vocal tracts. Logan Blue (The Conversation)
From here, we hypothesized that deepfake audio samples would fail to be constrained by the same anatomical limitations humans have. In other words, the analysis of deepfaked audio samples simulated vocal tract shapes that do not exist in people.
Our testing results not only confirmed our hypothesis but revealed something interesting. When extracting vocal tract estimations from deepfake audio, we found that the estimations were often comically incorrect. For instance, it was common for deepfake audio to result in vocal tracts with the same relative diameter and consistency as a drinking straw, in contrast to human vocal tracts, which are much wider and more variable in shape.
This realization demonstrates that deepfake audio, even when convincing to human listeners, is far from indistinguishable from human-generated speech. By estimating the anatomy responsible for creating the observed speech, it’s possible to identify the whether the audio was generated by a person or a computer.
Why this matters
Today’s world is defined by the digital exchange of media and information. Everything from news to entertainment to conversations with loved ones typically happens via digital exchanges. Even in their infancy, deepfake video and audio undermine the confidence people have in these exchanges, effectively limiting their usefulness.
If the digital world is to remain a critical resource for information in people’s lives, effective and secure techniques for determining the source of an audio sample are crucial.
Key Capabilities, Including Manned-Unmanned Teaming with Manned Fighters, Autonomous Relative Navigation Formation, Multi-User Handoff, Demonstrated by Kratos Platforms
SAN DIEGO, Sept. 19, 2022 (GLOBE NEWSWIRE) — In a release issued under the same headline on Monday, September 19th by Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS), please note that Eric DeMarco’s title was incorrect. The corrected release follows:
Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS), a leading National Security Solutions provider and industry-leading provider of high-performance, jet-powered unmanned aerial systems, announced today another recent successful flight from its family of Collaborative Combat Aircraft (CCA)—flying and demonstrating capabilities since 2015. Kratos’ family of CCA’s include more than four different aircraft types, with each having been flying for several years, proving, validating, and demonstrating key mission capabilities, as the DoD refines the ultimate range of requirements for the various CCA classes.
All of Kratos’ CCA systems are high subsonic, high maneuverability (high-g) jet aircraft, each optimized for different mission capabilities, with each incorporating stealth and other capabilities to help ensure survivability in today’s contested environment. Kratos’ publicly announced family of CCA systems range from a 350-pound class system to a 6000-pound class system and unrefueled ranges in excess of 3,000 miles.
Kratos rail-launched and runway-independent CCAs are developed to maximize performance per cost rather than being at the exquisite end of the capability and cost level. Therefore, they are ideal for “large mass, high quantity” scenarios and for distributed capability operations, where the loss of any one aircraft has a minimal effect on mission success and a minimal effect on cost of the overall mission. Current and recent conflicts, such as the war in Ukraine, have emphasized the validity in the distributed/high mass strategy for today’s battlespace, further supported by the cost equation.
Across a portfolio of internally funded efforts and funded on-contract efforts, Kratos CCAs have flight-demonstrated the following mission capabilities in flights beginning in 2015 and continuing throughout the last seven years:
autonomous self-navigation
autonomous relative navigation, i.e., flying in formation and teaming with manned fighters
in MUM-T mode based on the manned fighter/attack aircraft path
network based encrypted communications
control handoffs between ground operators
airborne operators in the mission area
airborne operators remote from the mission area
Kratos-only autonomy flights
open system high level autonomy control from other providers/standards
collaborative operations with multiple CCAs
collaborative operations with manned systems (MUM-T)
communications relay missions
sub-UAV / loitering munition deployment operation
internal “payload” carriage
external “payload carriage”
weapon system carriage, deployment, and operation
terminal effects/mode delivery including successful target impact
Steve Fendley, President of Kratos Unmanned Systems Division, said, “There have been many reports in the recent months/years about the promise of capabilities – such as relative navigation autonomy for MUM-T operations, multiple CCA collaborative missions, control handoffs from multiple users/commanders for a single or group of UAVs/CCAs – demonstrated through UAV system simulations across the industry. Notably, each of these critical capabilities have previously been actually flight demonstrated and proven with the Kratos CCAs, beginning in 2015. Our aircraft have operated in actual flight—being controlled from, flown in formation using relative navigation based on the manned assets, and flown in coordination with F-16s, AV8-Bs, F-35s, F-22s, T-38s, CRJs, and other manned, as well as unmanned, assets.”
Mr. Fendley continued, “Kratos’ systems include inner loop and outer loop autonomy up through elements of level 4 with Kratos baseline software. The Kratos software includes open architecture interfaces to enable control from systems including the Government Reference Architecture Skyborg ACS, for example. All of these have been flight demonstrated on our CCAs with the Kratos baseline autonomy providing the foundation capability. Our continued internal and on-contract work is focused on supporting the DoD in closing on the final requirement sets for the wide range of mission applications and on having field ready systems, which have been flight proven even before the ultimate capability requirements and programs have been published.”
Mr. Fendley concluded, “The DoD has reported consistently, especially in the last several months, that runway independence and the ability to operate from multiple non-large base locations is a critical enabler for our military’s successful operations in the most critical enemy threat scenarios. The DoD has also reported consistently that large quantities or a mass of CCAs are the game-changer for success in the wargames and threat analyses. Other characteristics/capabilities which are significant enablers for mission success in these engagements/missions include a level of survivability through signature, speed, and maneuverability, plus range and endurance in substantial excess of today’s fighters, and finally, affordability based on both the mass analyses and cost trade conflict equation. Kratos’ systems have been designed specifically in response to each of these fundamentals, all which support the wargame analysis keys to success.”
Eric DeMarco, Kratos’ President & CEO, said, “At Kratos we have always been committed to ‘designed and built in the USA’, supporting the American worker, family, industrial base and our Country. As evidenced by the pandemic, supporting and strengthening the U.S. defense industrial base at all tiers is a critical key to the defense of our Nation overall. As part of this mission, Kratos develops and demonstrates complete capabilities with actual hardware, actual software, and actual systems. Proving capabilities within the challenging uncrewed aircraft arena can and will ever only be confirmed through actual flight—not simulations.”
Mr. DeMarco continued, “By progressing to actual flight and actual demonstration with high capability-per-cost, yet affordable, systems faster than traditional and conventional platform providers can achieve, Kratos is changing the status quo. We believe in being disruptive and are investing our own resources at an industry-leading, unmatched rate to ensure the warfighter has increased capabilities sooner for less cost. At Kratos, affordability is a technology, and we will remain fully committed to this approach, including American designed, sourced, and built systems, which I am confident, especially based on the current and rapidly increasing threat environment, combined with the current financial and budget realities, is the right answer for our warfighter and for the United States overall.”
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technology for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research, and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, small to mid-sized jet engines and technology, training, and combat systems. For more information go to www.KratosDefense.com.
Notice Regarding Forward-Looking Statements Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made on the basis of the current beliefs, expectations, and assumptions of the management of Kratos and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Kratos undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Kratos believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Kratos in general, see the risk disclosures in the Annual Report on Form 10-K of Kratos for the year ended December 26, 2021, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the SEC by Kratos.
Why Apple Can Hold the Line on iPhone Prices and Keep Getting Relatively Cheaper
Inflation in the U.S. is surging to near a 40-year high, with prices on food, fuel and pretty much everything seeming to rise more every month.
Smartphones may be an exception.
Apple, for example, recently announced its new versions of the iPhone and other gadgets, and turned a lot of heads when it said it wouldn’t charge more despite higher costs to make the devices.
This is puzzling because companies typically raise prices in line with inflation – or at least enough to cover the increased costs of making their products.
Consumer price data tells an even more befuddling story. The latest consumer price index data suggests smartphone prices are actually down 20.4% in August from a year ago, according to an index released on Sept. 13, 2022. That’s the biggest drop of any detailed expenditure item the Bureau of Labor Statistics tracks, and contrasts with the overall 8.3% increase in prices.
What’s going on?
As an economist teaching business school students, I enjoy exploring and explaining these economic puzzles. I believe there are two basic explanations – one for the data and another for Apple.
Why Consumer Prices on Smartphones Fell
The story behind the consumer price index data is easier to explain, if a bit technical.
The 20% drop over the past year isn’t unusual for smartphones. In fact, according to the index, they almost always go down from month to month. Since the end of 2019, smartphone prices have come down a whopping 40%.
And though smartphones are showing the biggest drop in the index, tech gear more broadly – from computers to smartwatches – also tend to fall over time. In the previous 12 months, televisions are down 19% and what the government calls information technology commodities are down 8.8%.
Part of the reason for their steady decline is found buried in the Bureau of Labor Statistics website. The consumer price index tries to measure a constant quality of goods and services in the economy. This means it seeks to track the price changes of the exact same set of goods and services each month. It’s comparing the price today with the price of the exact same thing a month or year ago.
For most goods, it’s not really an issue because their quality doesn’t change much over relatively small periods of time. For example, an apple you bite into today is pretty much the same as an apple you ate a year ago.
Smartphones and other technology-heavy gadgets are different. Because smartphones are constantly improving in quality – with the latest updates of an iPhone or Samsung Galaxy awaited breathlessly every year – it is more difficult to ensure you’re comparing prices of products of the exact same quality.
For rapidly improving items, the Bureau of Labor Statistics uses what are called “hedonic regression models” to estimate these changes in quality over time. Hedonic models measure the same amount of satisfaction. While this sounds complicated, the goal is simple: to figure out how much each new smartphone feature changes the price.
As a consumer, you are essentially doing this whenever you decide whether it is worth paying the extra money for that marginally better camera or extended battery life when buying a new phone.
And so, the 20.4% drop doesn’t mean you’re going to pay less for a new smartphone. But it does suggest you’re getting 20% more bang for your buck versus the same phone a year earlier. Whether it’s worth it is another question.
Why Apple Kept Prices Flat
That brings us to why Apple didn’t change its prices, even as the quality of the iPhone improved and supply chain costs went up.
Beyond the quality issues, one of the main ways supply chain problems are affecting phones is in the shortage of computer chips. If there is any product dependent on computer chips, it is smartphones. The shortage has resulted in delays to produce cars, trucks and many other consumer items.
The shortage has also increased the price of semiconductor parts. The U.S. government’s producer price index shows the price of semiconductor parts like chips and wafers steadily rising since the COVID-19 pandemic began in 2020, after falling for years. Chip prices are likely going up 20% in the next year.
For these and other reasons, analysts were expecting Apple to increase its prices.
Instead, Apple released its latest iPhone models at the same prices as the last two models, or US$799 for the iPhone 14 and $999 for the pro version. Keeping prices constant during inflationary times means iPhones are getting relatively cheaper.
So why isn’t Apple increasing prices? Is it just being kind to its customers, who have fueled tremendous profits for the company over the past decade?
Probably not.
With a gross profit margin of over 40% – meaning that’s how much it makes over the cost of producing all its products and services – Apple can probably afford to absorb increased chip and other component costs.
My best guess, since the smartphone market is fairly competitive, is that Apple is keeping prices the same to build market share in the U.S. – beyond the record 50% it recently hit – so the iPhone remains one of the best-selling smartphones.
So while the cost of almost everything we buy is rising, you can take some comfort in knowing at least one item is getting both better over time and not succumbing to an inflationary price spiral.
This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Jay L. Zagorsky, Clinical associate professor, Boston University.
What is Proof-of-Stake? A Computer Scientist Explains a New Way to Make Cryptocurrencies, NFTs and Metaverse Transactions
Proof-of-stake is a mechanism for achieving consensus on a blockchain. Blockchain is a technology that records transactions that can’t be deleted or altered. It’s a decentralized database, or ledger, that is under no one person or organization’s control. Since no one controls the database, consensus mechanisms, such as proof-of-stake, are needed to coordinate the operation of blockchain-based systems.
While Bitcoin popularized the technology, blockchain is now a part of many different systems, enabling interesting applications such as decentralized finance platforms and non-fungible tokens, or NFTs.
The first widely commercialized blockchain consensus mechanism was proof-of-work, which enables users to reach consensus by solving complex mathematical problems. For solving these problems, users are commonly provided stake in the system. This process, dubbed mining, requires large amounts of computing power. Proof-of-stake is an alternative that consumes far less energy.
At its core, blockchain technology provides three important properties:
Decentralized governance and operation – the people using the system get to collectively decide how to govern and operate the system.
Verifiable state – anyone using the system can validate the correctness of the system, with each user being able to ensure that the system is currently working as expected and has been since its inception.
Resilience to data loss – even if some users lose their copy of system data, whether through negligence or cyberattack, that data can be recovered from other users in a verifiable manner.
The first property, decentralized governance and operation, is the property that controls how much energy is needed to run a blockchain system.
Voting in Blockchain Systems
Blockchain systems use voting to decentralize governance and operation. While the exact mechanisms for how voting and consensus are achieved differ in each blockchain system, at a high level, blockchain systems allow each user to vote on how the system should work, and whether any given operation – accepting a new block into the chain, for example – should be approved.
Traditionally, voting requires that the identity of the people casting ballots can be known and verified to ensure that only eligible people vote and do so only once. Some blockchain systems allow users to present a digital ID to prove their identity, enabling voting with negligible energy usage.
However, in most blockchain systems, users are anonymous and have no digital ID that can prove their identity. What, then, stops an individual from pretending to be many individuals and casting many votes? There are several different approaches, but the most used is proof-of-work.
In proof-of-work, users get votes based on the amount of computational power they have in proportion to other users. They demonstrate their ownership of this computational power by solving difficult mathematical problems. If one user can solve twice as many problems as another user, they have twice the computational power as other users and get twice as many votes.
However, solving these mathematical problems is extremely energy intensive, leading to complaints that proof-of-work is not sustainable.
Proof-of-Stake
To address the energy consumption of proof-of-work, another way to validate users is needed. Proof-of-stake is one such method. In proof-of-stake, users validate their identities by demonstrating ownership of some asset on the blockchain. For example, in Bitcoin, this would be ownership of bitcoins, and in Ethereum, it is ownership of Ether.
Though this does require users to temporarily lock their assets in the blockchain for a period of time, it is far more efficient because it requires negligible energy expenditure. By the company’s estimation, moving from proof-of-work to proof-of-stake will reduce Ethereum’s energy consumption by 99.95%.
Ethereum’s ‘Merge’
This improved energy efficiency is why many blockchain systems intend to transition away from proof-of-work to proof-of-stake. Ethereum plans to make this change during the week of Sept. 15, 2022. This is known as the Merge. During this merge, operations will shift from being voted on using proof-of-work to being voted on using proof-of-stake. At the completion of the merge, only proof-of-stake will be used to vote on transactions.
The hope is that this will set up Ethereum to be sustainable for the foreseeable future.
This article was republished with permission from The Conversation, anews site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of Scott Ruoti, Assistant Professor of Computer Science, University of Tennessee
Nomination is in the Outstanding Immersive Technology Category
SAN DIEGO, Sept. 13, 2022 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a leading National Security Solutions provider, announced today that it has been named a finalist in Halldale Group’s 2022 Military Simulation and Training Awards. The award nomination reinforces Kratos’ leadership in the application of advanced immersive technologies to enhance military training.
Named in the Outstanding A/M/V/XR Application category Kratos was nominated for the Mixed Reality (MR) Mission Readiness Training (MRT) system it developed and fielded for Air Force Global Strike Command (AFGSC). MRT is a turn-key solution that enables aircrews to train in a containerized immersive environment consisting of a UH-1N Aircraft Simulator, Ground Party Simulator and Instructor Operator Station. The Aircraft Simulator is a high-fidelity replication of the cockpit, rear cabin, and simulated crew-served weapons enclosed in a Kratos mixed reality Holodeck.
The Ground Party Simulator, also a containerized immersive environment, is fully integrated with the Aircraft Simulator, enabling ground forces to seamlessly join the collective training mission with their aircrews just as they would engage together in real combat situations. With full mission rehearsal capability, the MRT system has doubled combat mission readiness rates and is certified for both qualification and currency training of AFGSC security forces.
Commenting on being named a finalist in MS&T’s prestigious annual awards program, Jose Diaz, Sr. Vice President, Kratos Training Solutions, said that: “Making immersive technology a key awards category reflects the transformative impact this technology is having on military training. Kratos is pleased to be in the vanguard of this training evolution.”
Halldale Group’s MS&T Magazine’s Simulation and Training Awards Program showcases the people, products, processes, and organizations that provide exceptional value to its military clients. Many metrics are used to describe value, but the underlying principle is that value ultimately resides in how well clients are enabled to achieve their goals. Value is about outcomes and is often expressed in terms of change in areas such as resource use, effectiveness, efficiency, time, access, readiness or even capability.
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms and systems for United States National Security related customers, allies and commercial enterprises. Kratos is changing the way breakthrough technology for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research and streamlined development processes. At Kratos, affordability is a technology and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training, combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.KratosDefense.com.
Notice Regarding Forward-Looking Statements Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of Kratos and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Kratos undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Kratos believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Kratos in general, see the risk disclosures in the Annual Report on Form 10-K of Kratos for the year ended December 26, 2021, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the SEC by Kratos.
SAN DIEGO, Sept. 08, 2022 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS), a leading National Security Solutions provider and industry-leading provider of high-performance, jet-powered unmanned aerial systems, announced today that its Kratos Unmanned Aerial Systems unit has received a Cost-Plus-Fixed-Fee Indefinite Delivery Indefinite Quantity contract award for $14,748,648 from the U.S. Navy for five year ordering period to continue software maintenance and updates of the BQM-177A Subsonic Aerial Targets (SSAT).
Steve Fendley, President of the Kratos Unmanned Systems Division, said, “This award provides the foundation to continue our work with the Navy, maturing and evolving the SSAT aircraft on pace with the threat environment. This enables us to collectively provide the training to stress and exercise our fleet prior to their deployments to increasingly challenging theaters of operation, ultimately strengthening our nation’s defense and helping protect the warfighter. Consistent with our corporate motto, we continue our trend to be ready for what’s next.”
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technology for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research, and streamlined development processes. At Kratos, affordability is a technology and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training, combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.KratosDefense.com.
Notice Regarding Forward-Looking Statements Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made on the basis of the current beliefs, expectations, and assumptions of the management of Kratos and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Kratos undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Kratos believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Kratos in general, see the risk disclosures in the Annual Report on Form 10-K of Kratos for the year ended December 26, 2021, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the SEC by Kratos.
