Andrew Sohn Notes SKIS, DAL, YUM, NFLX, DPZ

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Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

SKIS- Timothy Boyd, President and CEO

 

Macroeconomic headwinds were balanced out with increased demand in discretionary spending

We still felt we could reach last year’s numbers due to the pent-up demand and the excellent conditions that existed at our areas. Well that’s in fact what happened. We finished pretty much in level on both revenue and EBITDA year-over-year, and we view EBITDA as the primary benchmark for the successful execution of our strategic plan. Our properties once again demonstrated their ability to perform despite some significant weather challenges. This performance illustrates these properties consistency year-in and year-out.

 

Acquisitions to come

In terms of our acquisition status, we continue to look at several different opportunities. They all vary in size, scope and strategic value. As I have described in the past, this process involves working through these deals in the summer months and ultimately closing in the fall prior to the ski season. We are currently in this process right now and we are optimistic that we will be able to complete one or more of these acquisitions this fall.

 

Day and overnight drive ski industry

I think it’s important to reiterate how this season again demonstrated how the day and the overnight drive segments of the ski industry, which our portfolio represents continue to be very consistent performers. Going forward we also believe these type of properties will continue to represent attractive investment opportunities.

 

Strong demand for skiing

In terms of some of the trends we are seeing for next season, we believe the outlook is very positive. Obviously, we can’t predict the weather, however, we are still seeing strong demand for our product. Clearly, last season’s strong performance in spite of some of the weather setbacks demonstrates that continued strong demand. Growth in our early season pass sales is another significant indicator of our strong demand.

 

Great discretionary spending

This past season, as Steve mentioned, we saw an uptick in revenue and retail, ski school and food and beverage. We believe at least partially this was attributable to the lower gasoline prices. Since almost all of our customers drive to our facilities, we see this additional disposable income as a very favorable trend for us going forward.

 

 

DAL-Richard Anderson CEO

 

Expansion into Latin America

Our stake in GOL will further this effort as the largest domestic carrier in Brazil and it will provide significant long term upside in the region for Delta particularly as we move toward open skies with Brazil, when we couple our investment in GOL with the significant investment we have in AeroMexico we have the foundation for the strongest network in Latin America.

 

Ed Bastian President

 

Reducing winter capacity in the pacific

As we’ve laid out previously, restructuring our Pacific network is one of our biggest opportunities for margin improvement going forward and the early results of these efforts are positive. As part of these efforts, we’ll be reducing our winter capacity into Pacific by 6% to 8% including retiring six of the 747s and cancelling the loss making Seattle Canada service.

 

YUM-Greg Creed, CEO

 

China recovery is a rocky road

There is no doubt in my mind that we will make a full recovery over the long term and return to historic average unit volumes. We have the two strongest brands in China by a wide margin, but frankly the recovery is taking longer than we would like. We need to be more aggressive, more innovative and much more disruptive to step change the business… In any event, our top priority is to get our China business back on track and we are making steady progress as evidenced by our first and second quarter results. As we’ve discussed, we expect to have a strong second half of the year based on continued progress in China and fully expect YUM! to deliver at least 10% EPS growth in 2015.

 

 

Growth in existing spaces is a key strategic play

Additionally we continue to rollout our premium coffee. As of quarter end we offered our coffee in over 2,000 stores, providing an incremental sales lift of about a point of the stores offering coffee. The key to success in this business is grow existing or create new sales layers to build on. We’re excited that premium coffee is already driving sales and profits, while giving us another platform to grow from going forward.

 

 

Pat Grismer, CFO

 

KFC doing well in foreign marktes

An important element of this is robust franchise led international development as KFC opened 122 new international restaurants in the quarter and is on pace to set a new record this year opening 700 new international restaurants outside of China and India, including a recent new market opening in Myanmar, demonstrating the strength and broad appeal of this iconic global brand.

 

KFC thriving, Pizza Hut and Taco Bell more of a challenge

Outside of China we expect KFC to have another solid year and Pizza Hut to fall well short of its ongoing growth target despite the improving results we expect in the balance of the year. For Taco Bell, although we expect solid performance in the balance of the year, we expect much more moderate profit growth as we overlap stronger sales and margin performance from last year.

 

NFLX-Wilmot Reed Hastings, CEO

 

Undergoing cautious expansion

Over the last year, we’ve raised ASP about 5%. We’d like to keep that moving. So we’re going to continue to have incentives for people to move up in the plans as suits their usage pattern, but we want to take it very slow. Things are going well. There’s no reason to be disruptive. We’re not planning anything in the U.S. this quarter. It’s really focused on going very steady, very slow; and over the next decade, I think, we’ll be able to have more and more content and add more value and then to be able to price that appropriately.

 

Why Hulu struggled in Japanese markets

Well, Hulu had a couple of missteps. But now, today, four years later, under new ownership, they’re actually growing and seeing some real success in Japan. But the initial missteps, where pricing was too high, it was ¥2,000 or about $20 at that time a month, had no local content. So it seems pretty substantial missteps. In contrast, our pricing will be more aggressive than theirs was. We’ll have a local content, we may have some local originals. And Japan is a unique market because it’s very brand sensitive. So Japan will probably be our slowest market to get to certain penetration threshold, but it may be one of our best markets in the long-term because when the Japanese society embraces a brand, it’s a very deep connection, very long-term.

 

Theodore A. Sarandos, CCO

 

Latin American expansion

Absolutely. We’ve recently expanded beyond our own original shows. The only way to watch those shows in Spanish in the U.S. is on Netflix with subtitles and dubs available that we’re making for Latin America. And now we’ve licensed a lot of programming from Latin America into the U.S. and are getting incredible viewing on shows that were successful for us in Mexico that are now drawing huge numbers in the U.S. And, again, that’s a very different demographic than we’ve targeted before and are just barely starting to touch them by getting hundreds of thousands of hours of days on single shows. So really, really impressed with the relatively quick take-up on these shows.

 

 

David B. Wells, CFO

 

Deeper expansion might require different content creation streategies

As we penetrate deeper into the markets, there might be a question in terms of do we have to add more of the local mix into that and that will have implications for our content spending in each market, but right now what we’re seeing is that our current mixture is working across the markets.

 

NFLX still very much in growth mode

The move towards the global right will be one that will take a couple of years, few years to really flow through. Similarly through our move towards exclusivity, and in terms of the P&L implications for international margins. It really is going to be more about the penetration growth and the rate of growth in that market to begin with.

 

 

DPZ-Mike Lawton, CFO

 

Growth in new store openings and existing stores was strong

Our domestic and international divisions posted very strong same-store sales growth. We opened a significant number of new stores and our EPS grew 20.9% over the prior year…The drivers of this growth included domestic same-store sales which rose by 12.8% in the quarter. The increase this quarter was comprised of franchisees same-store sales which were up 12.8% and company-owned stores which were up 12.5% and this was due primarily to strong order growth.

 

Growth in foreign markets is strong too

Our international division had another strong quarter as same-store sales grew 6.7% lapping a prior year quarter increase of 7.7%. Our international division also grew by 172 stores made up of 178 store openings and 6 closures.

 

Revenue drivers:

Turning to revenues, total revenues were up $38.2 million or 8.5% from the prior year. This increase was primarily a result of three factors. First, higher domestic same-store sales and store count growth which resulted in increased royalties from our franchise stores and higher revenues at our company-owned stores. Second, higher supply chain center food volumes as well as increased sales of equipment to stores in connection with our store reimaging program. These supply chain volume increases were partially offset by lower commodity prices. And third, higher international royalties again from increased same-store sales and store count growth, which were partially offset by the negative impact of foreign currency exchange rates.

 

Patrick Doyle, CEO

 

Digit sales huge part of growth

Markets outside of U.S. are doing about 40% of sales from digital channels and while there are markets showing high levels of experience and excellence on the digital front, the opportunity exist to introduce and grow technology within many others. We look forward to helping our master franchisees established a digital presence or reached full digital capability within their market.