Patterson UTI at Johnson Rice Energy Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Contract drilling

“we’re one of the leaders of contract drilling and pressure pumping in the U.S.”

some people are worried but we’re still excited actually

“We’re actually excited still about the business we’re in right now. It’s still good times for us. I know there is a lot of challenges and people are worried about where the price of oil has come from, and where it could potentially go, but, I can tell you that our business still remain strong.”

139 rigs

“We operate a very high quality fleet of APEX rigs, we have 139 out there working today. We’re a leader in the walking rig technology, we came out with the first walking rig back in 2006, in the lower 48. We’ll talk a little bit more about, what that means for rig technology today. And we have a very large footprint across North-America including Western-Canada”

2/3 of revenue comes from drilling, the pressure pumping

” two thirds of our revenue stream comes from contract drilling. Now, we’ll jump into pressure pumping.”

774m on 25 rigs

“We continue to invest in our drilling fleet. In our 2014 estimate for capital spend is $775 million. We started off by saying in 2014, we were going to build 12 rigs, we increased that up to 20 rigs in 2014. At the last call in July, we said, we’re going to build 25 rigs across the next four quarters.”

four year payback for rigs

“If you look at how we were contracting rigs over the last couple years, we were saying that our terms were in the period of two to three years. Now for the rigs that are being contracted into 2015. We’re talking about terms that are almost all three years. And if we look at the paybacks, since we’re talking about capital here, for the last couple of years with the pricing we were getting, the payback was in that four year to five year range. But now that we’re contracting out into 2015, we’re pushing Apex rig pricing. The paybacks had moved to a little bit over four years at the EBITDA level.”

High spec rigs mean less volatility in downturn

“If you look at what happened in 2009 when the rig count overall in the U.S. came down because of commodities and other reasons, you saw the Patterson UTI dropped to 42 rigs that wouldn’t happen tomorrow if commodity prices came down. With all these 139 rigs that we have out there that are high spec, we get term contracts”

Industry is pushing us for more high spec rigs

“The industry is pushing us to build more high-spec rigs. The demand from the customers, the operators out there is saying look, we need more of the high-spec rigs. We don’t want to drill all these horizontal wells or mechanical and the older SCRs. That is why the demand is out there. Even though oils trading in this range down to 91, up a little bit to 93, it has not slowed down the demand for the high-spec rigs in the market.”

pressure pumping 2-3 year paybacks

“pressure pumping for the 155,000 horsepower that we’re ordering going forward of new equipment. We’re looking at roughly two-year paybacks to three-year paybacks and this equipment has a seven-year to 10-year lifespan. So, compared to drilling, it’s very good. It’s still good. It’s a good use of our capital to put it in both businesses, both drilling and pressure pumping and so where the market demand is, we’re able to do that.”

Pressure pumping maybe 10% oversupplied now

“when all this is done by middle of next year, we’ll have over 1 million horsepower, frac horsepower, very excited about the growth here. This is a good business to be in. You can see that this industry has started to tighten up with what you’re hearing from others like ourselves. At the beginning of 2014, we said this industry was probably 20% oversupplied. You’ve heard some big company say in the second quarter that it is down to maybe 10% oversupplied.”

Basic Energy Services at Johnson Rice Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

multi line service company in Permian Basin

“Basic Energy Services is a multi-line service company, mainly providing different service segments at the well site. Kind of cradle-to-grave servicing, founded in the Permian Basin 1992, started as a small well-servicing and fluid services company and has grown over the years primarily through a strategy of 50% organic growth and 50% acquisition growth.’

Provide services start to finish

“As I said, we try to provide everything the customer needs from the start of the drilling of the well to the plugging and abandonment of the well. There’s many service intervals during the lifecycle of a well, and we try to have the right fleet, the right people, the right expertise to handle any problem that they may have from the start to finish of their well, or any routine maintenance that’s necessary.’

Permian is busiest basin for everyone right now

“The Permian Basin is the core of our business right now, not only the busiest market for us but busiest market domestically for everyone in the oil and gas business. Here, we have about half of the Well Servicing fleet stations, almost half of the Fluid Service fleet, 32 salt water disposal wells which are very key to our Fluid Service business, 10 rental and fishing tool stores.”

25% of rigs are running vertical but 40% of the permitting

“Right now in the U.S., 25% of the rigs are running a vertical. 40% of the permitting that’s currently going on in the lower 48 is vertical. You’d say, well, that doesn’t really match. Why is somewhere in the neighborhood of 40% of the permitting vertical versus 25% of the rig fleet? Well, it’s because the vertical wells are quicker and more turnover there. The wells are shorter. You got to have more – a big permit process in place to keep up with that activity.”

Strive to have the most modern fleet in the market

“Our mission, other than to provide the best service we can in the safest possible way, is to have the most modern fleet in the market. And I think by and large, if you look at our fleet and the age of our equipment and compare it to some of the other competitors in the space, we have probably one of the most modern fleets out there. We have done this by vertically integrating a lot of our manufacturing business. We bought Taylor manufacturing in 2009. We have the ability to build and refurbish all of our own well servicing fleet, as well as building a lot of rental and fishing tool assets and some cement assets”

A lot of young kids going into the oil services business

“The industry, as busy as it is in some of these oilier markets, is made up of a lot of new hires to the oilfield, a lot of young people in their – 19-year-old, 20-year-old, 21-year-old, 22-year-old folks. They’re not legacy oilfield employees. They do want to make money in oilfield, but they know really nothing about it. And so, they come in very green and we have to do a lot of training on these folks because although this business can be very safe if you follow the rules and the policies, if you don’t follow the rules it can be deadly. And so, we spend a lot of time training our new hires.”

Room for consolidation among smaller oil service providers

” I said earlier this year, I thought there’ll be some larger deals done. I don’t know if we’ll get there before the end the year. I still think that environment exist though. I think there’s – consolidation is something that’s ripe right now and is going to happen within our service space on all of our segments; Fluid Services, Well Servicing and these Completion/Remedial assets. I think there’s too many service providers and we should have ample opportunity to do some consolidation”

Company Notes Digest 9.26.14

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

The Macro Outlook

3M doesn’t see any warning signs that the US is slowing

“We thought we’d have economic growth and that it would be a tailwind in helping us grow and throughout 2014 we’ve been seeing that and we really don’t see any warning signs of the U.S. slowing down right now.” ($MMM)

A hot question is whether or not volatile currency markets will impact earnings

Caterpillar doesn’t expect much impact because it has diversified manufacturing

“I can’t give you — I guess the best rule of thumb that I could give you is it is probably not going to have too much impact. We are not an entirely U.S. based company, not even close. More than half our employment is outside the U.S. We have significant manufacturing operations spread around the world. So it always depends upon which currencies move in which directions and where we have factories, but by and large, I think over the last 10 years, you have heard us talk less and less and less about currency impact as we become more — I don’t know what the right word is, more diverse in our manufacturing operations around the world. So I doubt that you would hear us talk much about it.” ($CAT)

3M hedges its exposure to currencies through derivatives contracts

“it’s 3M’s strategy to hedge approximately 50% of our economic exposure to those currencies” ($MMM)

Where there are effects, they wont necessarily show up right away

“Most of the yen-based spending is in COGS, actually, so the impact is delayed about a quarter based on their inventory flow through. So, you need to keep that in mind.” ($MU)

There would have to be a prolonged move in currencies to get companies to change their operations

“It’s not in our nature to shift from one month to another our source of supply, but when we see a sustained trend after a number of quarters, we do have the capability of moving manufacturing to a more advantageous location.” ($MMM)

Two areas of the economy that still have room for improvement: labor and construction

The low end consumer continues to struggle

“This quarter’s sales results can be summed up in one word: Inconsistent…We attribute much of this volatility to both unique weather and the belief that the low-end consumer continues to struggle.” ($AZO)

The low end will probably continue to struggle as long as labor costs don’t rise

“what we’re seeing in the labor market and to be honest, we’re really not seeing that significant of a change in our labor cost trends around the world.” ($MMM)

“if you’re trying to understand is there anything unusual that we anticipate in ’15 with respect to wage increases, the answer to that is no.” ($ACN)

Construction is still dampened too

“Construction is a mixed bag. Generally speaking, I can’t think of anywhere in the world where construction is actually good. U.S. is below the prior peak. Yes it’s better than where it was last year, but that doesn’t mean that its good.” ($CAT)

But there are real buyers out looking at homes

“The feedback I am getting from the field is that the quality of the traffic is improving. These are real buyers that are out there that are just taking their time right now and making sure they are comfortable with the home buying decision.” ($KBH)

Homebuilders are starting to move to more greenfield projects

“if you think about our industry is moving past buying finished lots and building homes on those and completing those communities to more deals that are self developed” ($KBH)

And there are labor shortages

“As we have been sharing, you hear it across the industry, there is pockets of labor shortages that, depending on the city, are really tough or not so bad and that’s fairly typical in our industry when things are recovering.’ ($KBH)

Meanwhile in the world of financial engineering…

Companies continue to issue debt to buy back stock

“Turning to the balance sheet, during the second-quarter we received $1.5 billion from the notes offering of which $1.1 billion was subsequently used to fund our accelerated share repurchase program, which commenced during the second-quarter, and is expected to be completed before the end of the calendar year. ($BBBY)

M&A (i.e. share prices) are expensive right now

“The market is one where there is a lot of interest. It’s also a market I characterize as feeling somewhat expensive right now…We’re seeing both strategic and financial buyers as our primary — it’s a pretty even balanced time.’ ($MMM)

Remember, easy winter comps are approaching (for Autozone weather effects are inverted)

“many investors have asked us about our expectations for 2015 relative to the more difficult comparisons our industry will have in the upcoming winter months. For us, our second quarter and third quarter results are more difficult comparisons. However, we’re optimistic we can grow in all our upcoming quarters” ($AZO)

China’s economy isn’t growing as fast as it used to, but there are still pockets of growth

“China, we don’t see the economy as a strong propellant for growth for 3M in China. Certainly not as strong as it has been several years ago…That said, we do have some pockets within 3M that are growing nicely in China. Industries such as healthcare where 3M competes or products or industries where we’re involved in personal safety or the air people breathe, the water that people drink, those are areas where we are seeing growth in China.’ ($MMM)

The Chinese are clearly moving to a more consumer oriented economy. Promotion of the cruise industry is one example

“the government has it as a priority now.The Chinese government has a plan for development of a cruise industry in China and that means, you are getting tremendous support and opportunity to participate led by the various governments whether it’s the Central Government or the provincial or the municipal governments like in Shanghai and Tianjin. And so all of that bodes well, we are beginning to gain momentum.” ($CCL)

Financials

Subprime auto-lenders have tightened their standards

“We’re clearly seeing them continue to provide, I’ll say less attractive offers than they were a year ago, less compelling offers for the customer so therefore we’re seeing less conversion in that space…we saw it happening at the very end of [FY]Q3. There was a notable shift in behavior.” ($KMX)

Mortgage underwriters are still tight at certain FICO thresholds

“We have seen a slight improvement in underwriting and I would still say that it is not as difficult as it was, but it still is a headwind as you look at FICO scores, they have come down somewhat, but they have not come down to the degree where you could say that the mortgage companies are underwriting to the broad, HUD approved underwriting criteria.You get under a 670 or 680 FICO, you still have to put a lot more money down and as a first-time buyer, you don’t have that.” ($KBH)

The back end of the payments industry is behind digital wallets, now it’s about getting buy in from merchants and consumers

“I would say most of the heavy lifting has been done. It’s now working with the next third parties, the big merchants, the wallet providers, the issuers in the markets to launch these services.’ ($V)

Digital wallets could completely change the customer experience at retail

“a lot of these solutions that are out there that are transforming the point of sale. Most of aren’t just changing the point of sales or mobile point of sale or changing this big register to the small digital configurable register. They are just saying actually we don’t need a physical checkout. We just need to know you are in the store. You can pay in an app and walk out, right. And so we think in app payments is going to be a huge development.” ($V)

There will be innovative applications for loyalty programs too

“I think we are going to see as Apple pay evolves or as this HCE or NFC wallets evolve, more and more links to value-added offers, loyalty coupons targeted offers because of what we can do with the network…So it won’t just be payment. We are going to have a lot of loyalty based programs as well, supported in these wallets.” ($V)

Consumer

Consumers continue to shift towards e-commerce

“We’re very bullish on our ecommerce opportunity. We’ve invested quite heavily in improving our operational capabilities or supply chain. We’re seeing, again, the category offense really resonate through dotcom. Obviously, the preferred channel, where a lot of consumers are shifting and moving.” ($NKE)

Autozone thinks e-commerce isn’t as large of an opportunity in auto parts as in other industries

“I think on the e-commerce side, when we look at the industry broad-based, we think that there’s some opportunity for our online sales, although it isn’t a significant penetration like it is in other industries. We recognize that a lot of people are coming for information relative it to be a content of the product or repair information, et cetera. So we think that it’s an integrated approach overall and that’s how we’re approaching it” ($AZO)

Locations are a strategic asset in omni-channel fashion retail

“we are not looking to reduce our stores or reduce the number of stores, because apparel — fashion apparel is still about that touch and feel, and as we had omni-channel capabilities, they become fulfillment center, they become a pick-up center and we think that across all of our brands that there is going to be an ongoing need for the store base that we have in all of our brands” ($ASNA)

Many retailers have made investments in e-commerce that still need to be leveraged. Gross margins are squeezed by some initiatives

“This decrease in the gross profit margin as a percentage of net sales in order of magnitude was primarily attributed to first, an increase in coupon expense resulting from an increase in redemptions and a slight increase in the average coupon amount, and second, an increase in net direct-to-customer shipping expense which was impacted by change in bedbathandbeyond.com’s free shipping threshold.’ ($BBBY)

Many retailers are taking a stand against across the board promotions, favoring more targeted strategies

“From a marketing perspective, we’ve begun to see customer response shifting away from traditional promotional strategies like storewide percent off and regular bounce back programs. We’re testing more targeted marketing to specific customer segments aimed at growing share walks in cross category engagements. Examples of this include focused programs in our best ad denim and bra categories.We’ll also focus on broadening our marketing investments to better reach both prospective and inactive customers, including more direct mail that goes to these groups and a significant digital marketing initiative and expanded the office. ($ASNA)

Nike sees consumers trending towards premium products. If this is accurate, then the promotional environment should start to lighten up

“we’ve seen it really in every market around the world where the consumer is definitely trending towards premium products. Well made with great innovation is certainly resonating with the consumers.” ($NKE)

Technology

Micron sees strong demand for DRAM from its PC customers

“On the client side, we continued to receive strong demand signals from our PC customer base…Given the strength of the PC market, we’ve optimized around the PC market… PC strength clearly today is helping lift mobile pricing and server pricing” ($MU)

All industries continue to adopt more and more technology

“So we’re starting to see good traction of course with more the B2C kind of industries if you will, I’m thinking about retail, I’m thinking about consumer good, financial services, telecom, good appetite for that but certainly we see the second wave of digital impacting now more the B2C businesses, I could have mentioned Healthcare.’ ($ACN)

Moving into interesting new applications in the internet of things

“then you move in to more the manufacturing kind of organization with what we know we call it the famous IOT, the Internet of things…we’re starting to put digital in what we are calling digital plant and digital operations and things we’re doing with some of our partners and we’ve recently created joint ventures as you might have seen with General Electric around aircraft maintenance as well as intelligent pipeline” ($ACN)

Caterpillar is seeing interest in internet of things applications in mining, sees autonomous mining in the future

“I think not just autonomy, but sensors on machines, telematics, remote controlled machines, fully autonomous machines, all of that is very topical, and probably certainly away for the — some of it near term, some of it longer term future. So it’s a big technology focus for us, and a lot of the customers are interested in it. I mean, it can be everything from as simple as predictive maintenance on a machine, tracking a machine, shutting a machine off, knowing where a machine is, all the way up through control of the guidance and ultimately automation. So it is a big deal.” ($CAT)

Materials, Industrials, Energy

Perhaps one reason that oil demand is lagging is that many entities have made it a point to reduce energy consumption over the last 7 years

“we have a series of technology initiatives in progress related to energy efficiency in areas like propulsion, lighting and air conditioning to name a few that we will continue to roll out during the resulting accelerated dry dock schedule. These initiatives have a quick payback period as we continue to steadily reduce few consumption in the years to come.It is gratifying to say we have reduced our fuel consumption by another 5% this year and 25% since 2007, meeting our stated goal of delivering a 20% reduction in carbon emissions ahead of schedule while saving more than 1 billion gallons of fuel and $2.5 billion of fuel cost during that period.’ ($CCL)

Energy production requires more horsepower than in the past

“Oil and gas is one of those kind of businesses that I think over time has just become more horsepower intensive. So 20 years ago, whoever heard of horizontal drilling, or injecting gas into a well, to increase oil flow or fracking, it has just become a more horsepower intensive business to get the same amount of output and that has been good for us, and that will probably continue to be good” ($CAT)

The railroad industry is investing in more horsepower too

“I think the railroads find themselves in a position, where a combination of much better business environment for them, and a bit of congestion here and there on some of their systems. I think they find themselves in a need for a bit more power, and so I think they may end up buying more or at least want more than we thought they were going to need.” ($CAT)

Miscellaneous Nuggets of Wisdom

When things get bad enough in an industry, it’s tough for them to go anywhere but up

“let’s take mining for example; it is so beat up right now, it is so — I mean, our production in sales of equipment is well below the replacement level. So barring a nasty recession or a recession, its hard to imagine that kind of an economic environment that we are in right now, there is a lot of scope for it to go much lower. So I feel actually pretty good about that. When it’s bad enough, kind of the only way up, the only direction is up. So I wouldn’t get predictive of that. I mean, we really haven’t seen much yet that would indicate, that that’s going to turn around any time soon. But I would say, if you are looking over the next few years, the bias, definitely would have to be up.” ($CAT)

Full transcripts can be found at www.seekingalpha.com

Jabil Circuit FY 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Splitting reporting into two segments

“going forward, we are going to report our business in two segments. The first segment is Jabil’s electronic manufacturing services, or EMS, segment. Our EMS segment will include our enterprise and infrastructure, high velocity, and industrial energy businesses.”

EMS segment characteristics

“The key characteristics of this segment are a common, holistic go-to-market approach; a value proposition based around leveraging IT, supply chain design, and engineering; technologies largely centered around core electronics, sharing of our large-scale manufacturing infrastructure, and the ability to serve a broad range of end markets.”

DMS Segment

“The second segment is Jabil’s diversified manufacturing services, or DMS segment. Our DMS segment includes our Nypro and Green Point brands. The key characteristics of our DMS segment are a diverse approach to engineering intensive solutions, steady participation in build to consumer markets, build to function versus build to print, access to higher growth markets, and an intense focus on material sciences and technologies.”

Differences in go to market

“So, again, as I said in the prepared comments, there’s a certain set of attributes and go-to-market strategies for our EMS business that are much, much different than the businesses that we take on for Green Point and/or Nypro.”

In EMS, driven by converging technologies

“But as I said in my prepared comments, it’s intriguing to me that as we see so many different technologies starting to converge so quickly, things like sensors, things like the additional bandwidth in wireless, things like cloud-based functions, things like appliances connecting to the internet, things going on in automotive.”

DMS opportunities in wearables, mobility, smart packaging, pharmaceuticals

“As far as the diversified space, I’d say the same thing. We’ve got great opportunities in lifestyles, wearables. Our mobility business is strong. And then our Nypro team, it’s, again, fascinating to me to see what they’re doing in the areas of packaging, what they’re doing in the areas of smart packaging, what they’re doing in the areas of pharmaceuticals, what they’re doing in the areas of overall med devices.”

Micron Technologies FY 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Continue to expect strong growth in DRAM demand

“Our long-term outlook for the memory industry remains favorable. For DRAM, we are forecasting 2014 industry supply growth of around 30%. In 2015, we expect DRAM industry bit growth in the low to mid 20% range, and beyond 2015 we expect industry supply growth to slow somewhat ranging from the high teens to mid-20s.”

Strong demand from PC customer base

“On the client side, we continued to receive strong demand signals from our PC customer base.”

Server customers adding more DRAM per systemr

“Server DRAM growth is being driven by customers adding more memory per system..This growth in server based memory is based on increasing server workloads, continuing to require DRAM performance and density and is a great example of a high-growth segment with a demand profile that is not sensitive to price.”

More DRAM in more smartphones

“The low to mid range price smartphone market is driven additional memory content as well, meeting the entry-level segment is evolving from phones with virtually no DRAM to new products such as the Android 1, which is 1 gigabyte of low-power DRAM. This is $100 smartphone targeting 5 billion users in emerging markets.”

Automotive market as well

“The automotive segment continues to benefit from memory content growth fueled by both infotainment and advanced driver assistance systems. Our commitment to the unique needs of this market in areas such as quality, reliability, longevity and service has enabled us to strengthen our market leadership in Q4”

Breakdown of DRAM business by market

“When you look at our DRAM business, today, the best way to think about it is mobile is roughly about 25% of overall DRAM. And, compute is roughly around 30% of DRAM. And then if you look at the specialty business, you asked about servers. Server is roughly just below 20%.”

Stronger dollar does effect them but effect will lag

“Yes, John. In terms of the yen, which is moving a lot just very recently as we all know, and the comment was on operating spending or general spending — yen-based spending. Today, our calculus is that our operating spend is impacted about – which is not just OpEx, but all of our yen-based cost of sales activities, too. Our impact is about $3 million to $4 million per one yen per quarter. Most of the yen-based spending is in COGS, actually, so the impact is delayed about a quarter based on their inventory flow through. So, you need to keep that in mind.”

Memory growth in server driven by more memory per server, not huge unit growth right now

“I think we think it’s not – the argument that you just posed is that there’s more server units being sold and our proposition is that there is more density, more memory bits going into every server. So if in fact, you are right, you will see even faster memory growth in the server segment. But, we’re talking about people wanting to put more capacity in a relatively modest single digit growth server business today.’

PC market is strong right now

“Given the strength of the PC market, we’ve optimized around the PC market on a relative basis, remember we want to be in all three businesses for the long-term…But PC strength clearly today is helping lift mobile pricing and server pricing and which led to pretty favorable results in the quarter.”

Nike FY 1Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

several trends driving sales

“I think about the evolving consumer landscape, there are a number of trends that play to Nike’s strengths. The middle class is growing around the world. Interest in sport continues to grow, and consumers are investing more and more in their own health and fitness. Apparel and footwear styles are becoming increasingly athletic. Because we know the consumer better than anyone else, we’re able to leverage these developments to accelerate our growth.”

Investments in DTC business are paying off

“A key component of this offense is our own DTC business, which is an important complement to the wholesale business around the globe. As I said, we delivered impressive growth in the quarter, with expansion in all three DTC concepts, in line, factory stores, and Nike.com.

Our investments in DTC as a strategic driver are clearly paying off, and we continue to see even greater potential ahead. And we’re investing to create compelling presentations with our wholesale partners around the world, as we expand the potential of the Nike brand in a holistic and integrated marketplace.”

Increased drive in sneaker culture in Europe

“we’re also seeing a really increased drive around sneaker culture, building around women in Western Europe.”

Online is a top priority

“We’re very bullish on our ecommerce opportunity. We’ve invested quite heavily in improving our operational capabilities or supply chain. We’re seeing, again, the category offense really resonate through dotcom. Obviously, the preferred channel, where a lot of consumers are shifting and moving.

Women’s business is up significantly in that mix. Our customization, or Nike ID, up significantly. Running, sportswear, really across the main key categories, we’re seeing tremendous resonance in that channel.

This will continue to be a major growth opportunity for Nike, and definitely a source of further investment. We think that the return on this investment will be as strong, frankly, as anywhere we have in the company. Very bullish. Top, top priority for the company, and continued opportunity for growth and profitability.”

Being a better retailer has helped us be a better wholesaler

“The other piece that we’ve talked about is the idea of us being a better retailer ourselves, so we can be a better wholesale partner. And that is actually working, so we’re able to transfer a lot of the learnings that we have done in our own stores, working with our retail partners around the world to accelerate their businesses too.”

Consumer is definitely trending towards premium products

“we’ve seen it really in every market around the world where the consumer is definitely trending towards premium products. Well made with great innovation is certainly resonating with the consumers.”

We let the merchants drive the pricing strategy

“In our organization, the people who are really on the front lines from a pricing and a consumer value standpoint are the merchants. So this is a set of decisions that the people who are at the marketplace are really driving that strategy.”

KB Home 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

There were delays that are typical when the homebuilding industry is ramping up production

“There were various delays around the system. The tempered closings, such a subcontractor shortages, inadequate municipal staffing among city inspectors and the inability of utility companies to get new communities energized or meters installed on completed homes. We always face these types of challenges, but they are more pronounced at this point in the cycle when the industry is ramping back up and we are self developing the majority of our new communities.”

Underwriting environment still tight especially for first time buyer

“While there has been some indication of a slight easing of credit requirements, underwriting remains tight and continues to impact the availability of mortgage financing, in particular for the first time buyer.”

Homebuilding is a local business

“As I often point out, homebuilding is a very local business and we are seeing very diverse market dynamics throughout our four regions. We like our current footprint, which has been carefully selected for its favorable long-term economic and demographic projections. In today’s environment, we are especially pleased with our strong positions in Coastal California, Colorado and Texas.”

Conversions are weak

“Our backlog conversion ratio for the 2014 third quarter declined to 53%, the lowest level in several years. While we are taking steps to address the factors that impacted our Q3 deliveries and intend to have most of these actions implemented by the end of the fourth quarter, it is important to note that the vast majority of these deliveries were deferred and not lost. As we realize improvements from the corrective actions, we expect to report a much higher Q4 backlog conversion ratios compared to the third quarter in the range of 65% to 70%, which would result in approximately 2,200 to 2,400 deliveries for the fourth quarter.”

Labor shortages, typical in this part of the cycle

“As we have been sharing, you hear it across the industry, there is pockets of labor shortages that, depending on the city, are really tough or not so bad and that’s fairly typical in our industry when things are recovering.”

Utility companies are struggling to keep up

“What we are continuing to bump up against relative to the utility companies, if you think about our industry is moving past buying finished lots and building homes on those and completing those communities to more deals that are self developed and in those it’s not just getting an electric meter plugged in, it’s getting the community energized. And the utility companies reduced staff in the downturn, just like everyone else and they are really struggling with their infrastructure to keep up.”

Part of the deferral problem is that can’t get communities energized in timely manner

“. We had 15 homes in the queue to deliver where the home is completed, the loan is approved, the buyers walked, because we can put temporary power to the homes to totally shake them down and present them to the customer, but we couldn’t get the community energized and in turn meters plugged in. So what in the past would have been a two day to a week process, took five weeks. And as a result, we deferred up to 15 closings at a meaningful price and above company average margin.”

Mortgage underwriting is tight at different FICO thresholds

“As to mortgage underwriting, I was trying to give a balanced view on the pluses and minuses. As I said, we have seen a slight improvement in underwriting and I would still say that it is not as difficult as it was, but it still is a headwind as you look at FICO scores, they have come down somewhat, but they have not come down to the degree where you could say that the mortgage companies are underwriting to the broad, HUD approved underwriting criteria.

You get under a 670 or 680 FICO, you still have to put a lot more money down and as a first-time buyer, you don’t have that.”

Don’t forget, new homes are a small part of the market

“I mean, pricing ultimately is the market function. New homebuilders are a small percent of the overall housing market. There has to be some alignment with resale pricing in order for us to sell homes and make money and that’s what we strive for.”

Spec builders have to turn inventory faster

“When you are a spec builder, the longer the home sits, the lower the price gets. We build value up and we are continuing to find ways to get higher margin through the revenue side”

There is real traffic out there

“The feedback I am getting from the field is that the quality of the traffic is improving. These are real buyers that are out there that are just taking their time right now and making sure they are comfortable with the home buying decision. And I think the good old days are gone right now where you could get, what I call a floor pop, we you could actually sell somebody on their first time in. We are seeing the customers come back four, five, six, seven times before they make the home buying decision. So I do believe that this increase in traffic suggests there is a strengthening interest in homeownership and we think it will help propel more sales in the future.”

Don’t take too much stock in new home sales data

“I don’t react too much to the monthly new home sales because they always seem to be adjusted 30 days later, and I am not sure the quality of the number, it’s a number that’s posted.”

Carnival Cruise Lines 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

We’ve turned a corner

“This is an exciting time for our corporation. Last quarter we indicated that we felt like we were turning the corner and our third quarter confirmed that we have. The 15% earnings improvement achieved in the third quarter and the increased guidance expected an even stronger improvement in full year earnings is truly a credit to our global team.’

Technology initiatives to reduce fuel consumption

“we have a series of technology initiatives in progress related to energy efficiency in areas like propulsion, lighting and air conditioning to name a few that we will continue to roll out during the resulting accelerated dry dock schedule. These initiatives have a quick payback period as we continue to steadily reduce few consumption in the years to come.

It is gratifying to say we have reduced our fuel consumption by another 5% this year and 25% since 2007, meeting our stated goal of delivering a 20% reduction in carbon emissions ahead of schedule while saving more than 1 billion gallons of fuel and $2.5 billion of fuel cost during that period.”

The Chinese government is promoting the cruise industry

“The Costa brand, as I mentioned, in the introduction here was the first brand to do so in China. And things take time to develop and we have been successful in developing our business there and others have come in now as well. What’s changed in addition to that, first was it just takes time to develop a market. But what’s changing in addition to that is that the government has it as a priority now.

The Chinese government has a plan for development of a cruise industry in China and that means, you are getting tremendous support and opportunity to participate led by the various governments whether it’s the Central Government or the provincial or the municipal governments like in Shanghai and Tianjin. And so all of that bodes well, we are beginning to gain momentum. Distribution system is learning how to market a product such as a cruise product. You are beginning to see players in China look at building the domestic brand, which we think will be real powerful at to developing that market.’

The brand has recovered very quickly, but of course we’d like it to recover faster

“Well, real quickly, in terms of the overall feeling about the brand. I would say that the recovery is probably the little faster than we had a right to believe it would be, but at the same time, it’s not nearly fast enough for all of us’

Optimistic about both North America and Europe going into 2015

“I would just say that we have seen the lengthening in the booking curve and higher prices in the first half of the year so far in North America. And while we’ve seen somewhat latent of the booking curve for the first half of next year in Europe, the prices are comparable pricing, so that’s probably what you are reacting to.

Having said that, I wouldn’t describe that broadly as North America being stronger than Europe or vice versa. Some of it has to do with the comparisons year-to-year and just a mix. So we’ll see how it goes. We are optimistic about both markets going into 2015.”

Continue to pursue fuel savings

“But, obviously, we will continue to aggressively pursue not only through the Department of Technologies but also managing deployments and managing the ships on itineraries from a fuel consumption standpoint, as well as all the practices onboard.

And so we will continue pursue fuel savings as we have in the past.”

We’re expecting quite a bit of growth in Asia and China

“Just one additional comment on the — on Arnold was answering, keep in mind that we’re expecting quite a bit of growth in the emerging markets particularly, Asia and China. So that should be able to profitably absorb a lot of that capacity and the other more established markets will see it more measured capacity increase.”

Accenture FY 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Marketplace is focused on digitization and rationalization

“In this fast changing environment we see the market becoming more and more polarized around two major things; Digitization to create competitive advantage and drive new sources of value, and rationalization to create productivity and efficiency gains.”

FX could shave 2% off of revenue growth

” For the full fiscal year ’15 based upon how the rates have been trending over the last few weeks we currently assume the impact of FX on our results in U.S. dollars will be negative 2% compared to fiscal ‘14. For the full fiscal ’15 we expect our net revenue to be in the range of 4% to 7% growth in local currency.”

Seeing traction in digital specifically in B2C industries

“Digital is pervasive across the patch. So it’s clearly a set of technologies and I’m talking about of course the digital consumer, the digital enterprise, the digital operations all related to analytics, of course cloud enabling technologies, usually known as SMAC in the past or [mobile] and each cloud is absolutely pervasive across the board. So we’re starting to see good traction of course with more the B2C kind of industries if you will, I’m thinking about retail, I’m thinking about consumer good, financial services, telecom, good appetite for that but certainly we see the second wave of digital impacting now more the B2C businesses, I could have mentioned Healthcare.”

B2B also strong with interest in internet of things

“nd then you move in to more the manufacturing kind of organization with what we know we call it the famous IOT, the Internet of things and we are taking step as well to move from the B2C to do B2B2C and from the B2B and from the digital consumer to the Internet of things. So the early adopters we are very pleased with them. They are the usual suspects but now we see good traction in all the parts of the business.”

Digital plant and digital operations

“e’re starting to put digital in what we are calling digital plant and digital operations and things we’re doing with some of our partners and we’ve recently created joint ventures as you might have seen with General Electric around aircraft maintenance as well as intelligent pipeline, which is the new launch we made with General Electric. And on the other side of the spectrum with Siemens around the SmartGrid.”

You really have to look at operating margin to understand our business

“ou also referenced gross margin and there is a lot of things that go into gross margin beyond just the contract delivery cost. You have for example things like training and recruiting and we typically bring a lot of people on broad in the fourth quarter and this year that was especially true as our revenue is growing, as an example…That’s why we repeatedly say that to understand our business you really have to focus on operating margin.”

Examples of Business Process Outsourcing function

“Of course from an F&A we communicated around this big win with this oil and gas company in Europe, a giant as well, we are doing all the HR, Administration of one of the largest consumer good company in the world and I can mention this and extremely recently in electronic equipment we’ve been selected to be clearly their backbone in running their Finance and Accounting, their HR, their IT and part of their sourcing operation to support them in one of their largest scale transformation program today in the industry.

So it is pretty hot and again I am coming back at the heart of our — at what I call repositioning or what I think our business is if you will from what we were and we are still famous for the more classic ERP and technology business.”

We dont’ anticipate unusual wage increases in 2015

“here are also a lot of markets around the world where there is deflation and deflationary trends for compensation and so — what we always do is we’re market relevant. And so if you’re trying to understand is there anything unusual that we anticipate in ’15 with respect to wage increases, the answer to that is no.”

Visa at Jefferies Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Speaker: Bill Gajda – Senior Vice President Innovation & Strategic Partnership

We enable NFC and have been strong supporters of its adoption

“As you said, we have had a longstanding relationship with Apple. They are one of our strategic accounts. So we identified when we started the group. I think really at the heart of the new elements of the Visa/Apple relationship are the enablement of their NFC platform.

“I mean, Visa for the last several years have been a strong proponent of NFC in all of its forms. We were the ones experiment with microSD, with device fidelity, supporting all assumed base implementations. We were the first to publish the HCE implementation and Apple, obviously, with iPhone 6 and 6 Plus decided to implement NFC.

Visa/Mastercard are really the ones developing the technologies behind Apple pay

“we were concerned that in taking those credential off NFC and allowing them to flow through a payment app and into the cloud that we didn’t want that card information being exposed over and over again outside of that secure element. And so we developed not just for Apple, but for the industry, this tokenization solution, so when a user puts in their card information for the first time or when a bank provisions an exciting iTunes account on a new phone that that card information is replaced by a token. A token that’s bound to that device and bound to the Apple Pay Service, so really can’t be used even if it’s intercepted, it can’t be used away from that device or away from the Apple Pay Service.

They’re the gate-keepers too

“We had to say, no, to a lot of really innovative solutions, because most of them involve putting card information in the cloud on an app through the airways over and over again.

The token system is bound to the device

“we developed not just for Apple, but for the industry, this tokenization solution, so when a user puts in their card information for the first time or when a bank provisions an exciting iTunes account on a new phone that that card information is replaced by a token. A token that’s bound to that device and bound to the Apple Pay Service, so really can’t be used even if it’s intercepted, it can’t be used away from that device or away from the Apple Pay Service.

The token is at the heart of things

With tokens we can think really flexibly about what we allow and so at the heart of Apple Pay is our token vault that database that translates between a card number and the token number, and our token service that does the provisioning of that token for the first time, that manages the lifecycle. If the phone is lost or stolen, the ability to replace it a token, the ability to register someone to make sure that that person who is putting that card into their phone is a person who owns a phone and who owns a card, and so our combination of token vault and token service is really what we have partner with Apple with.

some banks may develop their own token vaults, but that will still be mirrored at Visa

“I would say that the large issuers, the very large issuers are developing their own token vaults. And so they will have their database that translates a PAN to a token, but all of that information is sent to Visa to our token vault and mirrored that, because we have to provide that token service and do that translation when a transaction occurs.
So, I think for a handful of banks, they will have their own vault and do that translation, but for the vast majority of banks, they will use both our token vault and our token service.

Apple pay is the first tokenized solution

“I mean, a lot of wallets in the efforts to secure the transaction uses proprietary token solutions. And they have been around for few years. The first implementation of our token solution is Apple Pay. And everyone should remember that that token service is based on our token standard that American Express, Visa and MasterCard announced together. And so we’re all using fundamentally the same global tokenization service.
Apple Pay is the first. You’re going to see other tokenized solutions early in 2015. You are going to see our token services going to be available internationally early in 2015.

The industry is behind this effort, it’s now about getting the merchants on board

“I would say most of the heavy lifting has been done. It’s now working with the next third parties, the big merchants, the wallet providers, the issuers in the markets to launch these services.

I think customers will use it

“I think the customer experience, the ease-of-use, the ease of onboarding, because the way we work with Apple to define the system. I think will drive people to want to use their phone at the point of sale. There’s two barriers, customer adoption, registering their cards, getting provision, et cetera, and of course, there is still the acceptance barrier.
We need to grow NFC acceptance in United States.

Going to see more value add offers with Apple pay

“I think we are going to see as Apple pay evolves or as this HCE or NFC wallets evolve, more and more links to value-added offers, loyalty coupons targeted offers because of what we can do with the network…So it won’t just be payment. We are going to have a lot of loyalty based programs as well, supported in these wallets.“

We don’t need a physical checkout anymore

“a lot of these solutions that are out there that are transforming the point of sale. Most of aren’t just changing the point of sales or mobile point of sale or changing this big register to the small digital configural register. They are just saying actually we don’t need a physical checkout. We just need to know you are in the store. You can pay in an app and walk out, right. And so we think in app payments is going to be a huge development.”