Mastercard 4Q16 Earnings Call Notes

Ajay Banga

Global economic overview

“We continue to see bright spots as well as some areas of concern in the global economy in the US. Post-election optimism remains relatively high. Consumer confidence, unemployment, wages all seem to be holding steady. It’s still too early to tell what impact any new policy proposals might have on the US or other economies. But like all of you, we’re expecting to see initiatives around taxation, regulation, infrastructure spending and trade. And in fact on regulation, you’ve all seen the recent executive order talking about taking out two regulations for every one proposed. Turning to Europe, the economic recovery is persistent in many markets throughout the prior year, throughout 2016, led by Germany. And the prospects for this coming year of 2017 seem encouraging as economic sentiment and unemployment continue to improve. The UK appears to be stable. We’re seeing continued growth in travel to the country as a result of the weaker pound, and it’s going to take a few years obviously to work through the specifics of how Brexit is implemented. So, we remain watchful of the implications of that on the UK and broadly on the EU.”

India move towards electronic forms of payment

” In India, the government has recently implemented a plan to address its parallel economy and to help drive the shift from cash to electronic forms of payment. Given the heavy reliance on cash in that economy, this is expected to soften consumer spending in the short term, but could well fuel economic growth and modernize the payment system in the long term.”

I don’t believe that the administration wants to restrict trade

“The aspects of trade, Tien-Tsin, as you know, my normal approach to trade is that I continue to believe that the United States is way too large a marketplace for companies and businesses to feel that they shouldn’t be involved with having on-soil presence and on-soil activity and frequent travel in and out by business executives alike. So, I consider the US to be too attractive for that to change dramatically. I do believe like everybody else that in the corporate world, there are a lot of us have built our business on the freer flow of cross-border trade, data and people. If that were to change over time, that would be a problem, but I don’t believe that that’s what the administration wants to do. They want to grow the economy. The economy is not going to grow without the right inputs in the right places. It may change specifics of the way trade gets enacted, but I continue to be relatively bullish on where this economy could go over the next four to five years.”

Dislocation of demonetization in India

” So, India has only 1.4 million terminals actually at the point of sale, and it tends to be a very cash dominated market. I’d say 95%-plus of the transactions in retail are cash. When the demonetization happened, the two biggest currency notes were taken out of circulation, the INR 500 and the INR 1,000 notes constituted 86% of the currency notes in circulation. That’s the shock that is referred to as what could lower consumer spending for a couple of quarters. We saw that because restrictions in cash withdrawal from banks and from ATMs were instituted as the government tried to catch up with the demand for cash. With the new notes, they were printing, those notes had to be put into the market. The ATMs had to be redesigned. Their hoppers had to be redone. Or you can just imagine the level of work in a country where the largest public sector bank has 18,000 branches, and is spread across a relatively large country. So, that’s what caused some of the dislocation…I think the Prime Minister is to be credited for his willingness to take it on, because in the medium to long term, this could be transformative for the way India’s economy operates in the recognizable formal economy, as compared to the informal economy, where it’s denied taxation and denied credit and denied insurance. I think he’s really trying to do something pretty brave here.”

UPS 4Q16 Earnings Call Notes

United Parcel Service (UPS) Q4 2016 Results

David P. Abney

Global economic growth remains generally positive

“Now looking at 2017, the global economic outlook remains generally positive, and forecasts have risen modestly over the last few months. In the U.S., GDP growth for 2017 is forecast to be slightly higher than last year. The expansion of e-commerce is expected to continue, with another year of double-digit growth. On the commercial side of the economy, industrial production outlook has gone from negative to slightly positive. That favorable move is a good sign for the manufacturing sector. However, U.S. exports are expected to face continued headwinds from a strong U.S. dollar. Global growth estimates for 2017 have been largely unchanged. The outlook for both Europe and China has rebounded slightly, although economists are still expecting slower year-over-year growth.”

A new political era has begun

“In the U.S., a new political era has begun, and we look forward to working with the Trump administration and Congress. We expect the economy will be center stage, along with efforts to strengthen U.S. competitiveness. There are opportunities for progress on a number of critical issues that impact economic growth.”

Capex will be higher to grow the business faster

“That all being said, I think how you should think about the CapEx is for the next several years, we’ll be a little higher than we have been, say, the last six or seven years. But it’s all about continuing to create value, continuing to grow this company a little bit faster than historical norms. And that’s why we also guided on the revenue the way we did. So we’ll again talk a little bit more about our CapEx and where we’re headed at the Investor Conference, but I think that gives you a pretty good picture of where we’re headed.”

Trade agreements definitely lead to more volume

“And I can tell you that in every country where the U.S. in the last 10 years has reached a trade agreement, we have seen an actual real increase of packages entering our network going out to these countries, U.S. exports, of a 20% increase. And 20% increase, whether you get the benefit from many bilateral agreements or one multilateral agreement, you can see how that adds up.”

President Trump is not against trade agreements

“And you know in spite of the headlines, and there’s been quite a few, President Trump is really not against trade agreements. Now, he’s made it very clear he wants trade agreements to be fair from a U.S. perspective. And he also has made it clear that versus multilateral agreements, that he’s much more focused on bilateral agreements.”

We are encouraged that the US will focus on trade agreements

“We did get a separate question, and it was concerning TPP and how disappointed are we that the U.S. has withdrawn from TPP negotiations? And obviously, UPS is a big supporter of TPP, and we thought it was a modernized trade agreement for the 21st century. And so, yes, we would like to see multilateral agreements like that get approved. But I can tell you that if you follow the President’s strategy, and you do a series of fairly quick bilateral agreements with the major countries that are involved in TPP or that may eventually have been included in TPP, we think you can still get there, maybe not as quickly as you would in this manner, but we are encouraged that the U.S. is going to focus on trade agreements.”

Under Armour 4Q16 Earnings Call Notes

Under Armour (UA) Q4 2016 Results

Kevin Plank

CFO leaving

“In addition to our earnings results this morning, we also announced that Chip Molloy has decided to leave Under Armour for personal reasons. With this marking Chip’s last call, I’d like to say thank you and wish him well in his future endeavors. Chip will continue to serve in an advisory role for a period of time.”

Traffic decline caused more promotions

“So first, I’d like to explain a few things. What happened, what we learned, and what we’re doing about it? So let’s start with what happened. In the fourth quarter, slower traffic caused significant promotional activities earlier, deeper and broader than expected. This commoditized some of our more basic core product that had previously sold through for us in years past. This, in addition to higher demand for more lifestyle silhouettes caused us to be out of balance with our assortment. So we lost top line volume as we work to adapt through our mix and pricing.”

We’re in a constant state of evolution

“Being a growth company means that we’re in a constant state of evolution. In 2017, we will remain on offense by continuing to invest in our fastest-growing businesses and leveraging our unique strengths and competitive advantages, and we have a lot of advantages: innovative product, brand strength, a broad base of premium sports marketing assets, unparalleled consumer connections and a strong, strong management team. Staying on offense, however, does not mean growth at any cost. It means striking an appropriate and responsible balance for the health of the brand in the near and long term.”

Need to make UA simple

” In my office here in Baltimore, I keep white boards. I use them as a way of organizing my thoughts, ideas, business plans and strategies. And recently with all the things written on them, I cleaned them all off, and I wrote just one phrase: make UA simple. And that’s just it. As we pass through $5 billion on our way to $10 billion, we must get better, faster and smarter at what we do, why we do it and how we do it. And in a way, that is simple and humble.”

The fact is that the consumer expects more today

“The fact of the matter though is that the consumer, they expect more today. They expect speed and convenience and best price and value, and they expect it the next day. So that choice of newness and customization is something that we need to react to and do a better job of. This idea though is we think that the cycle that we’re living in from retail and inventing the next big thing, it’s going to come from much closer to the concentric circle versus something built frankly off of a product that has to be hot, or an athlete or a celebrity, or a product that just happens to be about innovation.”

We’ll always have a wholesale aspect to our business

“So, I don’t think any of these things – I think the way that we’re viewing it is, of course, we like controlling our destiny, but we began as a wholesaler, and we’ll always have a wholesale aspect to our business with the best partners out there that continue to prioritize us and put us and present us in a way which we think tells and helps explain the great products that we have and doesn’t just differentiate us by price.”

Manpower 4Q16 Earnings Call Notes

ManpowerGroup’s (MAN) CEO Jonas Prising on Q4 2016 Results

Slight improvement in Europe

“I would say this if you look at the economic growth outlook noise aside, I think many sources have cited a slight improvement in particular in Europe. The unemployment numbers for Europe came out earlier today and they show the lowest level of unemployment in Europe since 2009, but of course still significantly higher than what we have in many other markets. The EU unemployment came in the Euro area I should say came in at 9.6%. So down 90 basis points compared to year ago. So the labor markets are slowly healing. And I think that’s part of our cause for cautious optimism as we look ahead but as you said there is always political uncertainties I could derail it, but we remain with what we see and how the conversations are with the employers and for now those conversations are constructed.”

Mike Van Handel

France just out of the starting box from an economic standpoint

“But France has barely made out of the starting box as it relates to coming out over the recession both from an economic perspective as well as from a labor market perspective. So France is really on the spectrum very much in the early phases of economic recovery and we are hopeful that what we are seeing now is the start of that. We expect it to be similar in the sense that it’s slow growth and uneven also in France. But the work that France needs to do or the progress France needs to make to get back to where they were before the recession is still substantial.”

Honeywell 4Q16 Earnings Call Notes

Honeywell International’s (HON) CEO Dave Cote on Q4 2016 Results

Net exporter

We’re a net exporter, so on balance it would benefit us from a tax standpoint. When it comes to repatriation, it depends on what the final deal is. If there is really high tax that’s put on in, well, that makes it a lot less interesting. So, we’ll have to judge it when we see it.

Animal spirits

“I would say, it’s changed become more positive. I’ve really been impress to see that improvement in animal spirits, small company CEOs, big company CEOs, a small banks that I’ve talked to, really quite surprising, so the animal spirits are real, there is no doubt about it. And hopefully if we can just get a few specs here with some actual actions that could be enough to really start turn the herd. I don’t think it takes us to crazy levels, the GDP growth and if it did that would be a problem. But I think we are going to see an improvement here, not ready to bid on it, we’re going to continue to plan for a slow growth global economy, but it still feels more positive than it has in a while coming off of worst recession since the great depression.”

A trade war is bad economically

” you have to be worried about a trade war. If it gets to that point, it’s not going to be bad just for trade, but it’s going to be bad economically, it’s kind of tough to be in economic island now especially if you are the number economy in the world. So it depends on how all that gets handled. And yes, of course it’s a concern for us.”

Better than it’s been in a long time

“Well, I do think and I’ve said this for several years that I don’t economist also really understand what happens after a severe financial recession, it was true that 30s and it was true of this one, and hit overall confidence was just really, really strong, really hard, and when you have the whole herds thinking about slow global growth and that’s just the way it is and that’s just the way it’s going to work, well, it becomes self-reinforcing because we all act that way. If you take the look at the conditions for recovery, it actually pretty good for while, they were been talking for number of years about how good consumer balance sheets were in the U.S. You look at capacity utilization, it’s in good shape, unemployment down 4.5 or so percent, you can argue under employment, but still employment in good shape, our bank balance sheet in the best condition, they’ve ever been, most companies balance sheets really good shape, and I really think it just need to spark. And the election assuming that we – the right things gets follow through and we don’t end up with some unintended consequences provide that sparks and I’m really encourage by what I’m seeing. Now it’s got to turn into something, but right now the feelings are better than I’ve seen them in long time and that could be enough to get the herd moving in the direction of saying, I’d better not miss this moment as oppose to just hunker down and keep waiting it out.”

Cote leaving

“Thanks. After 15 years at the helm, this is my last earnings call as some of you pointed out. It’s been an honor to lead the Honeywell team for this many years. And all of us are proud of what we’ve accomplished. I’ll have to say we are even more excited about what’s coming. Our outperformance will continue because we’ve invested heavily in people, process and portfolio to do the seed planting that we’ve always done.”

Colgate Palmolive 4Q16 Earnings Call Notes

Colgate-Palmolive’s (CL) CEO Ian Cook on Q4 2016 Results

We remain committed to emerging markets

” we remain I must say overall very committed to the emerging markets. We see a strong consumer base there. We have strong brand loyalty there and we continue to see good opportunity for growth there.”

Slowdown in France

“Well clearly, France category is turning negative was not a pleasant or expected event. I think there is public information out there that says that some retailers in France have suffered from the same problem which is to say consumer purchasing weakness in France. So, you’re certainly seeing deflation in France and indeed in some categories, volume reduction. So, the focus has to be to right that with your customer partners on two things…So, the sharpness of the slowdown was a surprise.”

Upping advertising spend meaningfully

“I think for 2017 we have stepped up our advertising quite meaningfully from 2016 and we believe in uncertain time with clearly slowing category growth with the innovation pipeline we have it is to our advantage in 2017 to invest that advertising deliver that growth and keep consumers with our brands. So we think it’s a good level Olivia I mean we have planned due diligently and we are very satisfied with the advertising level we have as I said it includes a sharp uptake in sampling as well. And these are all into the programs that we have on the ground behind brands and the new products that we have. So we think the plan holistically is an appropriate plan for 2017.”

John Faucher

Premiumization paying dividends in the US

“In the U.S., we finished the year with market share is either upper flat majority of our categories, our innovation continues to perform well. We have a strong pipeline plan as we head into 2017. Our premiumization strategy continues to pay dividend. The Colgate Optic White franchise finished 2016 with 6.4% market share year-to-date up 80 basis points year-over-year. We expect further momentum in 2017 behind this month launch Colgate Optic White variant. We are also seeing year-over-year improvement in market share as for our sense for sensitivity business helped by our latest launch of Colgate Sensitive Smart White toothpaste.”

Unilever 4Q16 Earnings Call Notes

Unilever’s (UL) CEO Paul Polman on Q4 2016 Results

Demonetization has affected underbanked areas

“We really have looked at the demonetization and what our business in India is, is an enormously well distributed business, both in rural India and in urban India. We have that as an enormous strength. And the main effects of demonetization have been in the regions where you don’t have a banking sector that is well developed, like central India, so better developed in the south and the west but underdeveloped in the central India. And secondly, in the distributor trade, wholesalers and small trade where there’s really been a cash crunch, lots of daily cash transactions.”

Brazil negative volumes deepening recession

“Yes, Martin, these are two good questions. Let me go to LatAm very, very quickly. Brazil, negative volumes in a deepening recession, volumes are down for the year. I don’t think that will change in the near future. We have strong price growth there to recover the devaluation-related cost increases. ”

Graeme Pitkethly

Brazil down trading accelerated in second half of 2016

“In Brazil, rising unemployment and reduced consumer confidence meant that the contraction of consumer spending power and down-trading accelerated through the second half of the year. In fact, in the fourth quarter, market volumes declined by almost 10%.”

Have had to increase pricing in emerging markets which can have significant impact in emerging markets

“These sharp cost increases require pricing, and sometimes a temporary decline in volumes, as consumers and retailers adjust. In emerging markets, the key points we watch are the affordability of our products for consumers and the actions of local competitors. In some cases, as was the case in skin cleansing in India, the impact of the transition to the new consumer price levels can be significant.”

Intel 4Q16 Earnings Call Notes

Brian M. Krzanich

An explosion of data

“By 2020, the average person will generate about 1.5 GB of data per day, while smart and connected devices of the future will produce data at many times that rate. Autonomous cars, for example, will generate about 4,000 GB of data each day. The resulting explosion of data is creating tremendous opportunity. But data alone isn’t valuable. It’s the transmission, aggregation and analysis of the data that results in value and impact. Intel will play essential role in those steps because our products are key to turning raw data into high-value insight and information.”

We power 90% of machine learning servers

“Finally, in Artificial Intelligence, we believe we have the industry’s strongest product portfolio. Intel processors power well over 90% of servers deployed to support machine learning workload, and we are winning the vast majority of AI solution based on strong product performance and customer value.”

PC is not back to zero unit or positive growth

” Those two things put us in the PC market in the unit level in the mid-single-digit decline. That’s better than if you went back a year or so ago, we were in the high single-digits, depending on how you looked at it and where you counted from the 2-in-1 devices. So, it is starting to get better, but I don’t think we’re back at a zero unit or a positive unit. But as Bob said, what we’ve really been focusing on in that space is how do you make money, how do you sell up, how do you do a better business performance in that kind of market? ”

Moving to public cloud faster than we expected

“I think that certainly some of that is, that it’s moving to the public cloud, it’s moving to those areas at a faster rate than I think we expected. It’s also been a little bit slow about developing private cloud and we’re working with several partners like Microsoft, Azure and others around the private cloud segments as well for the enterprise. But if you take a look at the long-term, we still see this as the growth engine and still getting into that double-digit regime.”

Why we’re in memory

“Sure. So let’s talk about Memory in kind of a big picture, John, and then I’ll let Bob talk a little bit about how the CapEx lays and what our view on CapEx is in the space. But we are in this space for one reason because I understand it’s a cyclical business that tends to be fairly difficult from a price capacity standpoint. But we believe we’re coming at it with two very unique technologies. Our 3D NAND technology has some of the best performance and best cost in the market. Our current version of 3D NAND has a 15% cost value over the competition, and our next version, second generation, has even a higher when you look at it on a density basis. And so we believe we’re going to be able to bring differential cost and performance in 3D NAND that will give us a unique position, and that, combined with our knowledge of the data center, should allow us to really provide compelling product for data center SSDs. 3D XPoint is very different and that is a unique technology that bridges between memory and storage, and we believe it can re-architect how big data applications, artificial intelligence applications where you want large amounts of data being brought up as close to the compute as you can, will really transform not only the architecture of those systems but the performance of those systems.”

Enterprise/cloud dynamic

“our view is that enterprise will continue to decline. A lot of that is those workloads moving to the cloud. It will get to a point though where it starts to stabilize. And those – because there are still things that – workloads that will want to be in a private cloud. At the same time, we believe as the world becomes connected, cloud will grow at a much, much faster rate. And I made a point in the prepared remarks, where if you look at the cloud of today being mostly based on people, the average person will generate about 1.5 gig of data a day. An autonomous car, when those things start hitting the road – and we’ve started to build these data centers for some of the trials we’re working with – I mean you’re talking about petabytes of data that you’re having to deal with and 4,000 gigabytes a day off is the average autonomous car. You put a couple of those on the road and you need petabytes of storage to handle that. So, we do believe that the cloud will move at a faster rate as these connected devices become basically more available. That said, the cloud is becoming bigger than the enterprise.”

Robert Swan

We’ve taken a more cautious view of PC

“Now, let me turn to guidance. First, some context. First, our guidance assumes a stable macroeconomic environment, but we have taken a more cautious view of PC consumption versus third parties, particularly in our outlook for the emerging markets including Russia, China and Latin America.”

Microsoft 2Q17 Earnings Call Notes

Satya Nadella

Examples of cloud customers

“A prime example is Mars, a $35 billion business with 60 brands. An early adopter of Office 365, Mars is using Office and Windows 10 to transform how its 80,000-strong global workforce collaborates while staying secure. And more recently, they have begun running mission-critical workloads on Azure with hundreds more on the way, including inventory management using Azure IoT. Swift Transportation, one of the largest trucking companies in the United States, is digitizing work for nearly 20,000 drivers with Office 365 and Skype and is using Azure to harness the data from their sensor-equipped trucks to optimize driver productivity and safety.”

Have reorganized the sales force to be more technical up front

“I would say the overall change that we are going through, and this has been ongoing for I would say the last multiple years, is transforming our field engagement model, where we’re putting a lot more technical depth in the front-line sellers so that they can engage, whether it’s data specialists, cloud specialists, security specialists, or even productivity specialists. Because it’s super-important for us in this phase when people are looking for solutions to help them visually transform, for us to have a very fundamentally different type of capability in terms of our sales, and that’s the transformation. And so we have really reorganized ourselves, both in the headquarters and in the field, to be able to recognize that shift.”

Seeing customers span cloud offerings

For example, in FinServ, some very Tier 1 trading applications now using some of our capabilities in service fabric, which is really a PaaS service, which allows you to manage microservices with low latency and high scale, that’s a place where we are seeing in fact activity, whether it’s game development or trading applications. We are seeing even interesting use cases of Azure functions, which is completely serverless. In fact, you can think of it as a price cut for anybody who cares about being very, very smart about cloud consumption. Going serverless is something that we in fact advocate. So across the board, I feel we have the right mix of IaaS, PaaS, SaaS, and per user SaaS services like Azure Active Directory, which gives us the right mix to be able to even have the right margins long term. We’re not concentrated in any one layer of the stack, which is something we do by design because our vision has always been that we want to of course offer all of these layers, and customers will choose depending on their needs and their scenarios. And we are now seeing even a single customer estate spanning all of these.”

Office as SaaS means always up to date and secure

“But in addition to that, I must say there are two other things that are increasingly becoming fairly relevant in the adoption cycle, which is moving to both Office 365 and Windows 10 and getting essentially to this new frontier for productivity, which is an always up-to-date operating system, which is secure, and an always up-to-date Office experience that is a SaaS service. We’re increasingly seeing that resonate, not just in small business and some of the high-tech industry as it has been in the past, but now even in the regulated parts of the enterprise. So we are very excited about that.”

Amy E. Hood – Microsoft Corp.

Expect continued FX headwinds

“Now let’s turn to the outlook, first FX. We had originally expected FX rates to lessen going into H2. However, given current rates, we expect continued currency headwinds for the rest of the year. For Q3, we now expect about 1 point of negative impact on total revenue. Within the segments, we anticipate about 2 points of negative FX impact in Productivity and Business Processes and Intelligent Cloud, and 1 point in More Personal Computing. “

SVB Financial 4Q16 Earnings Call Notes

SVB Financial’s (SIVB) CEO Greg Becker on Q4 2016 Results

2017 will be a year of liquidity for VC investments

“As we look into 2017, we believe there are a lot of reasons to be positive. We are optimistic that 2017 will be a stronger year for VC investment and exits in 2016. If 2015 was the year of funding and 2016 was the year of recalibration, we believe 2017 has the potential to be the year of liquidity. ”

VCs have a lot of capital to deploy

“Fundraising remained extremely strong in 2016 despite the investment pull back as VCs raised $41.6 billion, the highest amount in a decade. Clearly, VCs will have a lot of capital to deploy in 2017, although later stage startups may continue to attract the lion’s share of investment at the expense of early-stage companies.”

Exit markets looking promising

“As we enter into 2017, the exit markets are looking promising. In addition to the 20 or so venture-backed companies that are formally registered for IPOs, we are aware of a growing pipeline of other companies that have file confidentially or are planning to file for an IPO. While the exit markets could remain somewhat challenging, especially for companies with high valuations, the mood has markedly improved over last year, helped by solid performance of companies that went public in the second half of 2016 and greater confidence since the US election.”

Repatriation could mean more M&A

“Yeah. So, two points, Ebrahim. One is, I can’t recall that far back when we actually got the change in the repatriation. So, I actually can’t off the top of my head remember exactly what the impact was. Do I believe it’s a big impact? The only place where it has a potential for an impact is from an M&A perspective. If a lot more cash comes back in, could you see more M&A from larger corporations as they now are flush with a lot of liquidity and now they’re going to be willing to put that for growth, that’s clearly a possibility.”

Michael Descheneaux

Lower tax rate will benefit shareholders

“Yeah, I think that’s a fair way to look. At this point – again, there’s been talk about what’s deductible, what’s not deductible. Again, we can’t go into that because it’s just – who knows right now. But just, all things being equal, if you drop the federal tax rate, you’re right, for the most part, at this point, we would see most of it drop into the bottom line and benefiting shareholders.”

Likely to continue to see stress in early stage

“So, it’s Marc Cadieux. Early stage was interesting in the fourth quarter, in that we saw charge-off levels in the early-stage segment that were reminiscent of 2015 best of times, but then we also saw an increase in new early-stage non-performers, indicative of that continued stress in that segment, going on from the recalibration that started last year. And given the diminished rate of investment in early-stage companies throughout 2016, it’s our conclusion that we’ll continue to see some stress in that segment.”