SVB Financial 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Highest quarterly amount of VC activity since 2001

“In the first quarter of 2014, venture capitalists invested $9.5 billion in 951 deals, the highest quarterly dollar amount since the second quarter of 2001. ”

Corporate VCs

“corporate venture funds and investors, which pulled back significantly during the economic crisis, have been reemerging to support new company formation. These corporate funds essentially provide research and development arms for mature companies trying to avoid disruption by startups with new technologies and delivery mechanisms. And in a testament to how pervasive technology has become, corporate venture funds are sponsored not just by technology companies, but by entertainment, auto, apparel, retail, financial and consumer product companies.”

Environment weighs on earnings power

“Although higher rates are a long-term opportunity, they remain one of our major challenges in the short term. While we have demonstrated that we are able to deliver strong organic growth without help from rates, our earnings power is nevertheless constrained by the current rate environment.”

competition remains intense

“Competition remains intense and shows no signs of letting up. Some lenders appear to be stretching for growth at any cost, and we’re seeing more situations where we have to decide whether it makes sense to sharpen our pencils or walk away.”

Markets are hot, frothiness expected, but better than 15 years ago

“Finally, we’re keeping a close eye on valuations. The markets are hot. In our experience, a certain amount of frothiness is expected to be in any hot market. We take some comfort in the fact that the lessons of the dot-com era have significantly raised the bar in business models and IPO readiness. We believe the pre-IPO companies in the market today generally have much stronger business models than the pre-IPO companies we saw 15 years ago, and many of the valuations are justified. While we have a long history of working with hot markets and we have taken the lessons we’ve learned to heart, in particular, we had learned to take a measured approach when things are heating up.”

This seems very low compared to the rest of the banking system

“our bank level Tier 1 leverage ratio declined 32 basis points to 6.72%. As we have said in the past, our target Tier 1 leverage ratio is generally around the 7% to 8% range. ”

Low tier one because of huge deposit growth

“Tier 1 leverage could continue to trend down if the extraordinary deposit growth continues and if we do not take action. We have grown deposits $6.8 billion or 36% over the last 3 quarters”

Deposit growth coming from clients getting big funding rounds

“What’s been happening in the market is these companies are performing at a very strong level, and they’re getting this preemptive rounds that are substantial; $50 million, $60 million, $75 million. We thought that, that would be potentially temporary, and we thought that would slow down some time in the first quarter. We’re not seeing that.”

You do see people pushing the envelope

“clearly, there are more competitors: It’s large banks; it’s small banks; it’s venture debt funds. And as we’ve seen in other markets — or other cycles, I should say, you do see people pushing the envelope. So we do see some companies looking for non-warrant deals in situations where we think there should be one. When that happens, clearly, we think it’s temporary, and we think that, that isn’t priced effectively, not being priced effectively for the risk that they’re taking. And we’ve seen people cycle in and out of the markets when they go down that path.”

Business models are much better today than 15 years ago

“I think it’s really important, first and foremost, to talk about why this is different than the dot-com bubble back in — 15 years ago. And back at that time period, there were really 2 things going on: one is the business models themselves were — weak business model is probably the simple way to describe it and then you had high valuations on top of that. And so you have a recipe, when one fell, they both collapsed kind of at the same time. Today, what you see is incredibly sound business models. I — when I talk to venture capitalists I look in our own portfolio, you meet with CEOs, there’s more disruption going on in traditional businesses than any of us have ever seen. Now, the question is what’s the value of these disruptive businesses and these growth rates? And so the valuations that we’re seeing, which are, in some cases, billions of dollars in a private basis, I would argue, are justified. Now, the question is when you see multiples of these companies in similar industries, all getting high valuations, they can’t all be successful. So it’s hard for us to predict which ones are going to be successful and which ones aren’t going to be successful. But it is kind of just a general frothiness that we’re looking at. But again, the business models themselves are much more sound. So what happens there? From a credit perspective, I look at it and say the valuations are less of an issue than the business models themselves. Because it just means they’ll still be able to raise money, but the valuation may not be at $1 billion dollars, maybe they raise money at $300 million or $400 million or maybe $200 million.”

Microsoft 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Nadella’s on the call, positive change

“my first day, I have said I am committed to an ongoing dialogue with investors. Joining these investor calls going forward is going to be a big part of that, and I am enthusiastic about today’s call.”

Technology respects innovation, not tradition

“our industry does not respect tradition, it only respects innovation.”

Nadella’s vision

“When I think about our industry over the next 5, 10 years, I see a world where computing is more ubiquitous and all experiences are powered by ambient intelligence. Silicon, hardware systems and software will co-evolve together and give birth to a variety of new form factors. Nearly everything we do will become more digitized, our interactions with other people, with machines and between machines. The ability to reason over and draw insights from everything that’s been digitized will improve the fidelity of our daily experiences and interactions.”

This sounds a little like Tim Cook

“We want to build products that people love to use. And as a result, you will see us increasingly focus on usage as the leading indicator of long-term success.”

Nokia closing 4 months behind schedule

“Now, let me share some thoughts regarding Nokia Devices and Services. The acquisition will close tomorrow, which is about four months later than the deal economics we outlined in September assumed. ”

Takes time to relearn a business even when you’ve been there 22 years

“The first 10 weeks or so have been extremely energizing and as I have said for me what was important to us to reach out, talk to lots of different constituents and relearn the place and see it for the first time and just get a different fresh perspective even in spite of having spent 22 years here it’s been fascinating to get that fresh perspective.”

Cloud first, mobile first

“from day one I have had this deep conviction that our vision is about being going boldly into this mobile-first, cloud-first world.”

Using data weekly, monthly

” would say culturally Satya mentioned about being more data driven. I think in addition to the day-to-day, which was more focused on customers, I think really it’s a cultural statement about how we are going operate more internally as well. And so maybe that’s the most forward-looking comment I could tell you which is that being empowered to look weekly, monthly and see how we can get better and better and better. And I think that’s actually driven a lot of excitement around here.”

Starwood 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Mature markets continue to show steady improvement

“This year’s begun pretty much along the same trend line that we’ve been seeing since the end of the economic crisis. Across mature markets, namely North America, Japan and Europe, growth and demand showed a steady improvement on last year and from what we can see, conditions are set to stay along that same trajectory.”

Occupancy rates peak, late cycle dynamics at play, REVPAR growth through price increases

“Across North America, occupancies once again were pushed to record highs. At this point, you’d expect late-cycle market dynamics in North America with REVPAR growth predominantly coming through higher rates, which is generally what we’re seeing. Yet despite this, we’re still several years away from seeing any real increase in supply in most markets.”

High end supply especially tight

“At the upper end, new supply is especially scarce, so as long as the U.S. continues its even modest economic growth, it seems likely that high occupancy and rising rates are here to stay for a while.”

China stronger than expected

” in China. For this first time in over a year, performance was stronger than we expected…Our result was especially good in light of government austerity, not to mention a slight drop in inbound travel to China. We’ve also improved our profit margins despite rising costs.”

China will have challenges though

“We’ve maintained for some time that an economy as large and rapidly changing as China’s will see some fits and starts. And while we agree with our owner partners that the Chinese economy has many years left to grow, we also recognize that China will need to make significant structural changes along the way.

In the near term, we don’t have much visibility into where the business is headed as transient booking windows are short, and we also have fewer large customers from whom to get a general read on business, let alone a commitment to meetings and conventions with long lead times.

What we can see in China remains — that it remains a relatively low occupancy market. So it’s likely that our growth will be driven more by occupancy than rising rates. Wages have also been rising faster for some time now, so we’re adapting our staffing levels to maintain our margins.”

Tighter liquidity has tempered the pace of real estate development in China

“On the development front, our view is the tighter liquidity has tempered the pace of real estate development. Many of our new hotels are slated for Tier 2 and Tier 3 markets and are part of mixed-use developments. As a result, the time it takes between signing and opening new hotels has become longer.”

Make your customers happy

“our business model is to make global guests happy so we can deliver great returns to our owners.”

Sheraton going to some obscure cities

“Looking at Sheraton’s pipeline, nearly 1/3 of the hotel’s — of the brand’s new hotels will be in markets where we don’t yet have — that don’t yet have a high-end hotel. These are cities like Aktobe in Kazakhstan, Nouakchott in Mauritania, Erbil in Kurdistan. Around the world, we estimate, in fact, that there are about 200 cities that could support one or more Sheratons that don’t yet have one, and there’s, of course, great potential for the rest of our brands as well.”

Trying to sell hotels as fast as they can

“Moving on to asset sales. We continue to believe the market for hotel sales is becoming deeper with a larger pool of buyers and more buyers looking for portfolio deals. We have a significant number of assets on the market in North America, Europe and Asia. Our intention is to get transactions completed on acceptable terms as fast as we can.”

The growth in Airbnb is a real thing

“Yes. Look, I think that the growth in Airbnb is a real phenomenon. I think the perspective that anything that reflects on more healthy demand for travel and encouraging people to get out, just like discount airlines as well, is generally a good thing for travel, not the other way around.”

Private equity driving demand for hotels

“in the U.S. the buyer base is institutional. And what we’re seeing in the U.S., as we said on our last call is for the past several years, we were only able to sell hotels in ones and twos because the primary buyer was public REITs who would buy a hotel, issue some stock and then come back for another hotel. What we’re seeing now, of course, is much more private equity money and, therefore, a greater interest in portfolio sales.”

Verizon 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Not everybody has the latest smartphone

“Smartphone penetration increased to 72% of our total phones. We ended the quarter with 61.3 million smartphones and about 64% of those were 4G. So we still have about 22 million 3G smartphones and a little more than 23 million basic phones in our base which provides us with a good opportunity to move customers upgrade 4G smartphones.”

Verizon had a good quarter with tablets

“We had our best tablet quarter ever, activating 814,000 postpaid tablets, virtually all of which were 4G. This is more than double the amount from the first quarter last year and about 3% more than the fourth quarter.”

6.2 million FIOS customers not too bad

” we added 98,000 new FiOS internet customers in the first quarter and now have 6.2 million subscribers representing just under 40% penetration.”

New pricing schemes about choice, all of them are profitable

“this comes down to personal choice and again our sales forces is not compensated to drive traffic to any one sort of plan. At the end of the day, it’s all about customer satisfaction and treating our customers and the choices that they want. So, again, its – the way I look at this is, as we manage the business, these plans are all profitable plans to us. So it comes down to customer choice”

Network is performing well, capex flat

“We are through the congestion. The network performance is delivering what we expected to and as you see that in our CapEx spending, we are going to be more leveled this year.”

New pricing schemes may lead to more upgrades

“So we look to those other facets of the tablets and machine-to-machine and then if you look beyond that with VoLTE and multicast giving our customers even additional features that could potentially drive more usage on the network. So that’s really what the future holds for us. The smartphone category, I do believe that upgrades may increase with EDGE, but again I think it’s too early to tell.’

Really too soon to tell if this will have an impact though

“look, I think it’s way too early to tell yet how the impact of the installment plans will react on the upgrade rate. I mean, we’ve been at this for years and the upgrade rate is pretty steady. You will have fluctuations based on seasonality, but coming out of the first quarter, we really didn’t see any change in that.”

Blaming high tax rate for corporate spending stagnation

“I think what we continue to see here is that the United States is the highest corporate tax payer in the world and until we fix that situation, with all the discussions in Washington whether extenders will happen, won’t happen, whether we’ll get through tax reform or we won’t get the tax reform, there is just too much uncertainty out there for enterprises to really lock down on where they are going in the future.”

We are in harvest mode

“I think we are in harvest mode and we will continue to do the best we can with the technologies we have as alternatives for our customers.”

Lots of talk about edge, but very small percentage of customers are on it right now

“It’s less than 2%.”

Caterpillar 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Construction segment was top performer

“The most positive was Construction Industries. And it was up 20% from the first quarter of last year. And in fact, this quarter, it was our largest segment by sales, which were over $5 billion and up more than $800 million from first quarter last year. ”

Jump in construction spending was dealers built inventory and didn’t last year

“This year, that wasn’t the case and dealers reverted to the more usual seasonal pattern and built inventory in the first quarter for sale in the second quarter selling season.”

Mining is still showing terrible comparisons

“Let’s move on to Resource Industries, which, again, is principally mining. That’s a different story. Sales were down 37% from the first quarter of 2013, and most of the decline was end-user demand which, again, you can see in the retail statistics that we released yesterday where deliveries of new equipment were down 46% in the first quarter versus the same period a year ago.”

Good news is that order rate is at equilibrium

‘The good news is that we were close to an equilibrium of order rates in sales in the first quarter. And as a result, the order backlog for Resource Industries was fairly close to being flat with year-end 2013.’

Good refresher on decremental margin definition

“The good news is the decremental margin rate, that’s the change in margin divided by the change in sales, was a mere 25%. And that’s a demonstration, in our view, of good cost management in a business with a very variable margin rate that are much higher than 25%.”

Mining orders haven’t really improved

“Despite the prospects for a better year in the world economy and continued strong production at mines, mining orders for new equipment haven’t really improved and remain at pretty low levels.”

We thought it was going to get better, it didn’t

“Our outlook from January expected mining orders for 2014 to remain low, but be modestly better than the second half of 2013. So far this year, that hasn’t happened.”

Watching China closely, so far steady but it would be pretty bad for us if things slow

“we’re closely watching growth rates in China. We had a good first quarter in China. In fact, company sales were up 30%. But we’re concerned that if economic growth in China slows enough, it could have an impact on our business.”

North America driving strength in construction

“with Construction, I think the one area, geographic area, that’s, I would say, has had the most upside for us is actually North America. And you can kind of see that, I think, in the retail statistics that we’ve provided. It’s doing pretty good. So I’d say North America is the reason for the upside.”

Keeping an eye on Brazil, though not in same category as China and some other areas

“I would put Brazil macroeconomic as one or macro situation as one of those we would be watching. I would not put it in the same category as the others that I talked about: China, Ukraine, and maybe a couple of others in the Middle East at all. We’ve got a pretty stable business across Latin America. Brazil’s got some projects that are coming in that we — doing some things around infrastructure this year, next year and the year after that ought to help that. But the overall macro situation there is one to watch, frankly.”

Dealer inventory in good shape

“Dealer inventory, I think most places in the world, with a few minor product exceptions, is in pretty good shape.

Housing may get better but still way below where it was 6 or 7 years ago

“So I think our view of housing is that it will continue, particularly for starts, kind of continue to get better. We think this year is going to be over 1 million. So I think we’re pretty constructive on — at least for the U.S. housing, I mean. But again, you’ve got to put that in perspective. It’s still way below where it was 6 years ago, 7 years ago. So getting better, but not great”

Cash America 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Still haven’t quite anniversaried the drop in gold prices

“We are not yet through the anniversary of the prior year’s higher gold prices, which combined with the preceding factors lead us to expect that the second quarter results for the retail lending services business will also be down year-over-year.”

EPS expectations of 4.20 to 4.40

“we have not changed our full year expectations for earnings per share of between $4.20 and $4.40 per share.”

Still no sign that the low end consumer is getting any healthier

“While I’m still not prepared to declare a turnaround in consumer behavior, I do believe that growth in pawn loan balances and retail sales in this first quarter has encouraging signs. Our guidances aren’t reflecting any significant change in trends but we do remain optimistic.”

US still not clear what final regulations will be, more clarity in UK

“There is no clarity at this point regarding any potential rule making about the CFPB in the U.S. whereas the FCA has been more definitive with the February publication of the consumer credit source book that contains the final regulations that will cover the conduct requirements for letters of unsecured credit in the U.K. such as our wholly own subsidiary Enova.”

Going to have to be some changes in UK

“Enova had previously made changes in its business practices in contemplation of these new rules and the company will be making additional changes going forward to address the FCA’s requirements including changes related to debt forbearance, affordability assessments and potentially establishing our physical presence in the U.K.”

Reason for spinning off ENOVA

“Our reasoning is founded in our belief that the strategic focus and operational flexibility of the two businesses will be enhanced with the separation. As I have said at many times, the management focus, culture, operation metrics, risk profile, strategic opportunities of our own line of business differ greatly from that of our storefront business.”

The Cash America business left behind would deemphasize unsecured lending business

“we would expect Cash America to pursue its strategic goals of expanding its U.S. pawn shop business through future acquisition at Enova unit expansion, while limiting any international expansion and deemphasizing its unsecured consumer loan business.”

boring details of a tax free spinoff

“the way the tax free distribution rule would provide in that case that we’re going to separate some of the spin, we would probably have to dispose that 20% over no longer than five years out and more likely in 18 to 24 months.”

DR Horton 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Housing market still on track

“Housing market conditions remained favorable and continue to improve in a manner consistent with our long-stated expectations for the housing recovery. As expected, we are seeing the pace and strength of the recovery very significantly across our local operating markets, mostly tied to improvement in each markets economy is measured by growth in jobs, household incomes, household formations and increases in consumer confidence.”

Keeping mum on current trends though

“So in terms of what we’re seeing today, we’re only 3 weeks in April, so we really don’t have a whole lot to share, but we would expect our strongest sales quarters to be our fiscal second and third quarters in the year. So with our positioning, we would expect to have a strong Q3.”

May be some political help for first time home buyers?

“I think if we gain job growth in this country, which I think ultimately, we’re going to experience and I think, clearly, that’s where a lot of those first-time home buyers are going to come from. But I also believe strongly that as we move into this recovery, first-time home buyer is not participating at the level that a lot of our political leaders would like for them to be participating. And I think that they will see some encouragement from the government in terms of trying to get more and more people into entry level homes. So my focus is really the affordable buyer, job creation, as well as a little help in the politics.”

South carried regionally through the recession, now West and East picking up

“And as Rick Horton said, the best thing that could ever happen to him is for the East and West to take the pressure off of him. So they are doing that today. And we’re in a great position.”

Factors affecting first time buyers

“I think most of the jobs being created in this country, Steve, are entry-level jobs. And as a result, just by definition, I think they’re having to save a lot longer. I think the other thing that I was talking earlier, the help from the political side, is with the high student loan debt that these people get, these college kids are graduating and then adults are graduating. And there’s work on the political side that would help relieve them of some of that burden with the college debt. So as a result, even though they graduate from college, many of them have had difficulty finding higher-paying jobs. And secondly, they’re burdened with typically $26,000 with the student debt. So a function of getting them that entry-level job, which is pretty much a lot of them having to go into and perhaps a lower salary than what they expected, and some relief on the student loan debt, I think, that pool begins to grow.”

No comment

“As I’d like to say, I watch too much Fox News.”

Texas is a competitive market because it’s a good market. Fewer frictions

“Texas is one of the most competitive markets, but it also has few barriers to entry. And that’s one of the things that makes it so attractive, and that is that land prices are still competitively priced, so we can deliver a competitive lot. And there’s ease of entry in terms of not having go through, as we do in a number of markets, a 2- to 3-year entitlement period. Most of our land, we can get entitled and plotted within a period of 6 months or less. And there are adequate general contractors to develop lots down here. So in general, we think Texas has been a strong market. It’s a very competitive market”

Going after a more entry level product because others too expensive for many prospective buyers

“we’re trying to increase our affordable buyer pool in that market because we have seen people coming into our model homes in the D.R. Horton brand, who can’t qualify because of the pricing power that we had over the last couple of years.”

Still not a lot of appetite for subprime paper

“We, from our mortgage company perspective, don’t see a lot of institutions willing to buy {\[low FICO score] kind of paper.”

We don’t want a weather report

“we have a policy at D.R. Horton. And it’s a fair policy. And that is we don’t want our division presidents to give us the weather report. And so we’re not really — we work with our broad geographic footprint. To the extent that we did have weather-related issues is really a nonevent.”

Costs are going up driven by labor

“I think costs are going to continue to increase. We are fortunate that we have a lot of volume in most of our markets so that we can be more competitive with our subcontractors on the cost side. But clearly, labor is one of the cost components that’s going up. And lumber, I don’t think, is going to come down nearly as much as what it did last year. It seems like it’s going to hang high at where it is currently right now.”

How to market to first time buyers

“as you clearly are trying to attract the entry-level buyers, a lot of them living in apartments. And so we try to do a special marketing with the apartment complexes that are near us. And another potential pool are the people living with their — the college graduates and others that are living with their parents. And I think we do that primarily with the realtors. I also believe that our Express brand, that it’s going to be easier for perhaps parents to help their children get into homes because they could help them a lot easier with a lower price point, as we have, with the Express brand than they can in a standard price that’s with D.R. Horton.”

Analyst comment: the puck is going towards entry level

“I just wanted to just mention that I totally agree with your strategy there to go after the entry level. I mean, as I recalled last month, I think this is really where the puck is going. And I really congratulate you guys on really being unique and sort of skate to where the puck is going, so good job with that.”

Recessions Can Happen Without an Inverted Yield Curve

In the past an inverted yield curve has been one of the best indicators of an impending recession.  An inverted yield curve occurs when short term interest rates exceed long term interest rates.  For the last 50 years, almost every time that the yield curve has inverted, a recession started shortly thereafter, and there has not been a recession without an inverted yield curve over that time frame.

The yield curve is not inverted today, which is one reason that some have said that a near term recession is unlikely.  However, the current economic expansion has lasted longer than every expansion except for five others, so it shouldn’t be crazy to think that a recession could happen sooner rather than later.

Importantly, looking at history, recessions have happened without inverted yield curves in the past.  Japan has had five recessions in the last 20 years without an inverted yield curve, and the US had six recessions without an inverted yield curve between 1935 and 1965.

The common denominator between all of these non-inverted-yield-curve recessions is that they happened at low interest rates.  That implies that central banks have the power to prevent the yield curve from inverting, but low rates do not appear to be in and of themselves enough to prevent recession.

As the Fed looks like it will raise rates in 2015, it’s worth noting that at low interest rates, there does appear to be a tendency for recessions to start when short term rates are raised.  That’s not always the case though.  The US did have recessions in 1937 and 1945 without raising short term rates and two of Japan’s five recessions at ZIRP came without any change to short term rates as well.

Short and Long Term Interest Rates Since 1915

Japan Inverted Curve jpeg

 

A note on the data series: I’ve combined two data sets for each US interest rate series.  The long term series is the Moody’s Aaa index from 1919-1953, because the Fed doesn’t have a data set for treasury yields which goes back that far.  The spread between Moody’s Aaa and the 10 year yield is small up through the 80s though, so I think it’s a good proxy for long term risk free rates.  The short term data set combines the effective fed funds rate (1954-present) with the NY Fed’s rediscount rate (1914-1954).  The FOMC was established in 1935.  Prior to that short term rates were set regionally by individual Fed branches.  Up until that time the New York Fed was viewed as the most powerful regional bank and set the tone for the rest of the regions, so its interest rate was effectively the short term interest rate.

Facebook 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

1.28 users

“We continued to grow our community in size and engagement, with nearly 1.28 billion people now using Facebook each month and almost 63% visiting daily.”

Instagram at 200m users

“Messenger and Instagram both reached 200 million monthly actives this quarter.”

An example of a Facebook advertising success story

“One recent powerful example is Sport Chek, Canada’s largest sports retailer. They recently decided to pull their paper circulars, which their company have relied on as its primary ad vehicle for 92 years for two weeks and replace them completely with digital spend, a majority of which was on Facebook. During those two weeks, national in-store sales grew 12% year-over-year and in-store sales of the items they promoted on Facebook grew 23%.”

Getting more sophisticated on measurements

“we’re also really pleased with the results we’re seeing from our investments in measurement tools. Our online conversion measurement tools enable our direct response advertisers to measure the impact their Facebook ad campaigns have on online sales. And, we recently launched new offline conversion tools to measure in-store sales, which have yielded positive initial results.”

Focus on building a great ad delivery mechanism

“Our ongoing focus will continue to be on improving the quality, relevance and performance of our ads and demonstrating value to marketers. We believe we still have a lot of opportunity to generate future returns by continuing to focus in these areas.”

News Feed ads get a premium price

“The increase in average price per ad was primarily driven by a mix shift with more ads being shown in News Feed. News Feed ads have significantly higher engagement, click through rates, and price per ad compared to right hand column ads, so a higher proportion of ads appearing in News Feed drives up the overall average price per ad.”

Everyone gets a unique ad experience

“every person who uses Facebook has their own experience and the experience including the ad experience is personalized based on the other content we have available based on how much they’ve engaged with ads we’ve shown in the past etcetera.”

Advertisers want to be able to measure their spend

“Nielsen OCR anything that helps advertisers measure their spend is really important. I’ve talked on the call a bunch about how measuring online and in-store sales really matters. It also matters to marketers to be able to measure their spend compared to other investments they can make.”

Neilsen OCR has helped advertisers measure their spend across channel

“what OCR has done, it’s given advertisers and marketers comparability between TV and digital and our spend. I think in those comparisons we do very well. And I think that is part of the shift that’s happening and its part of why we see growing interest from clients.”

Consumers spending more time online than watching TV now

“last year was the very first time those lines crossed and consumers spent more time in digital, which is mobile and desktop than they did on TV.”

“where we are right now is, the average U.S. consumer as an example spent 4.5 hours per day on TV but five and three quarter on digital and that’s largely been driven by mobile.”

Marketers are looking for the highest ROI they can find

“So we definitely believe there will be and continuous to be a shift happening. I talked about a print shift happening with that example of Sport Chek in Canada. But we see this across the board that marketers are looking for the highest ROI they can find and they should be comparing us and everyone else across and they do that not just across digital but across print, across radio, across TV, across any other vehicle they can.”

Investing in measurement will pay off

“I think our investments in measurement really pay-off here. We say to our clients all around the world, we want to earn your business because we want to be the best dollar and the best minute you send because both their dollars and their time are so valuable.”

Apple 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Quarter even better than numbers describe

“Our underlying business performance was even stronger than our reported results imply. When you take into account changes in channel inventory this year versus last year and foreign exchange headwinds that we faced in several of our international markets. Setting foreign exchange and inventory changes aside, our underlying growth rate would have been close to double digits.”

Highest EPS growth rate in 6 quarters

“earnings per share growth of 15%, which is our highest earnings growth rate in the last six quarters.”

800 million itunes accounts

“We now have an almost 800 million iTunes accounts, most of these with credit cards. This is a staggering number.”

Weak iPad sales because they reduced channel inventory

“iPad sales came in at the high end of our expectations, but we realized they were below analyst estimates, and I would like to proactively address, why we think there was a difference. We believe almost all of the difference can be explained by two factors. First, in the March quarter last year, we significantly increased iPad channel inventory, while this year we significantly reduced it. ”

Still think that tablets will out number PCs

“We continue to believe that the tablet market will surpass the PC market in size within the next few years ”

Great growth/market share in Japan

“Japan, where revenue was up 26% in spite of the foreign exchange headwinds and where our smartphone market share reached an incredible 55%.”

Angela Ahrendts joining next week

“I’m looking forward to welcoming our new retail and online leader, Angela Ahrendts, who will be joining Apple’s Executive Team next week.”

Chinese buying 4s

“The addition of China Mobile coupled with great response to our more affordably priced iPhone 4S led to an all time quarterly record for iPhone sales in Greater China.”

Most of the cash is offshore

“$132.2 billion or 88% of our total cash was offshore. ”

Apple selling debt again

“To execute our updated capital return program in a tax efficient manner and leverage our very strong balance sheet, we intend to access the debt markets again. We plan to be active in both the domestic and international bond markets during 2014 for an amount of term debt financing similar to what we issued in 2015”

iPhone took market share all over

“We saw some pressure in the quarter because of the stricter enforcement of upgrade policies. So this was primarily in the U.S. as I mentioned last time. But if you really look at iPhone, the strength of iPhone was very broad-based and as I’ve mentioned, we gained share in a whole host of markets, from developing markets like the U.S., U.K., France, Germany to more of the emerging markets like China, Vietnam, and had the largest total sales of iPhone in the BRIC countries that we’ve ever seen in our history”

Carrier changes may help fuel upgrade cycle in some ways

“some of the programs that the carriers are running may serve to increase the upgrade cycle because there are some areas where customers can pay a bit more in the beginning and have the ability to essentially upgrade each year.”

Still tremendous growth to be had in smartphones

“what I see as the bigger opportunity for Apple is that the smartphone market is still only 1 billion or so units and it will eventually take over the entire mobile phone market. We’ve seen our ability to attract new users to iPhone to be very significant in the emerging markets.”

Remember, the carrier stuff is only in the US

“the things you’re seeing in the U.S. are not occurring in many of the other geos in terms of the upgrade policies and so forth. I mean, each country has its own kind of cadence associated with this, and the U.S. is – it’s in the 30% of our business, not 100%.”

Some of the weakness in iPad may be due to the fact that it’s grown so much so fast

“if you really look at it in just four years after we launched the very first iPad, we’ve sold over 210 million, which is more than we or I think anyone thought was possible at that period of time. And it’s interesting to note that that’s almost twice as many iPhones that we’ve sold in a comparable period of time, and over seven times as many iPods as we’ve sold in the period of time. ”

No degradation in customer satisfaction with iPad

“The other things you look at on iPad that are just blow away as customer sat is 98. There is almost nothing in the world with a 98% customer sat and the intention to buy numbers look good with two-thirds of the people planning to buy a tablet or planning to buy an iPad. The usage numbers are off the chart, far and exceeding Android tablets, four times the web traffic of all Android tablets combined.”

On acquisitions, we think it’s best to focus on what we’re good at

“The key thing for us, Steve, is to stay focused on things that we can do best and that we can perform at a really high-level of quality that our customers have come to expect.”

We’ve got some great things coming up

“we currently feel comfortable in expanding the number of things we’re working on. So we’ve been doing that in the background and we’re not ready yet to pull the string on the curtain. But we’ve got some great things there. We’re working on them. Very, very proud of and very, very excited about.”

We pay attention to detail, so it takes us some time to get things out

“for us, we care about every detail and when you care about every detail and getting it right, it takes a bit longer to do that and that’s always been the case, that’s not something that just occur”

We’ve always been this way

“we didn’t ship the first MP3 player, nor the first smartphone, nor the first tablet. In fact, there were tablets being shipped a decade or so before then, but arguably, we shipped the first successful modern tablet and the first successful modern smartphone and the first successful modern MP3 player. And so it means much more to us to get it right than to be first.”

Hopefully you see that we do well in all markets

“if you were unsure, hopefully this quarter demonstrates to you that we can do well in a number of geographies from emerging markets to develop markets.”