JS Earnings Call Notes 11.23.15 – Total Energy Services, Ross Stores, Workday, & Intuit

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Total Energy Services CEO Daniel Haylk said he won’t go after top line growth at the expense of profitability   

“We also seek to strike a strategic balance between equipment utilization and price and we have been continued to declined pursue business opportunities that are not profitable. Simply put we’ll not wear out our equipment for nothing.”

He expects the industry to consolidate in order to earn a respectable rate of return

We strongly believe that the North American energy services industry must consolidate to provide the efficiencies in economies of scale necessary to compete in an increasingly global market. We believe this need for rationalization will become more apparent over the next few quarters. However we’ll remain disciplined in the deployment of the owner’s capital as we continue to look to use our financial capacity and flexibility to pursue opportunities that will provide acceptable risk adjusted returns over the life of the investment.  Our view is things are going to settle out here over the next few quarters, there is going to be a lot of good acquisition and consolidation opportunities we’re going to use the strength of our balance sheet and our abilities to generate substantial cash at low utilizations.”

Total Energy Services CEO Daniel Haylk said his firm doesn’t play accounting games and back out one time expenses

“Unlike many in our industry we do not cargo so called one-time cost related to right-sizing our operations, as we view these costs to be part of the ordinary course of managing our business as well we take no pleasure in highlighting the difficult decisions that must be made during these difficult times that such decisions involve real people with real families.”

And he plans to reduce operating expenses in a challenging environment for energy

“Substantially lower activity levels coupled with excess industry capacity have resulted in a very challenging operating environment that is expected to continue for the foreseeable future. In such an environment we will seek to work with our stakeholders, increase operating efficiencies and reduce our operating costs so is to make the various markets in which we participate competitive from a global perspective.”

While pricing of their services continues to deteriorate

“Price seems horrible and at the end of the day we are seeing competitors work for prices that we simply can’t get to. And we are in a position where we are in business to make money that includes covering depreciation.  And there comes a point where you see park it, and we deliberately parked a bunch of equipment and we are keeping some core activity going to maintain employment for key people, but at the end of the day we are not going to work at a loss.”

Total Energy Services CEO Daniel Haylk said they have been very rational with how they have accounted for their assets on the balance sheet

We are disciplined. And so we’ve – this quarter obviously auditors are interested in the impairment issues. We’ve done a lot of the work that we typically would do at year-end now and we’re very comfortable with the caring values of our asset based and we do not expect to incur any capital asset impairments and again it’s being disciplined and you can argue there are non-cash isn’t that someone pays for it at some point, it also goes to rectificational issues and they were proud of the fact we’ve never return down any of our capital assets, acquisitions good will period and again it requires the intestinal fortitude not to jump on the bandwagon when times are booming.”

And he thinks there could be more pain ahead for other rig operating companies

And I can tell you the pricing that’s going on both in the rentals and the rig side we’ll lead to train wrecks the good thing about the rental and transportation side is those happen fairly quickly and I expect while you are already seeing a few insolvency some public most private that’s going to accelerate.”

Total Energy Services CEO Daniel Haylk reminded investors that he doesn’t give guidance and he wants to remain flexible to adapt to changing market conditions

For the same reason, we don’t give guidance generally, customer intentions are difficult at any time to predict.

And that scale matters in this particular business

“Scale matters, you’re spreading your cost over a larger asset base, you can definitely achieve efficiencies. The flip side is, we’re also seeing market exists in terms of insolvency.  So there is select markets that we compete in both above and below the border, where we’re already seeing the competitive landscape tighten up. And that’s going to continue. Whether we’ve hit bottom or not, I’m not going to give a forecast, but the longer this drags on the more people will go broke and the better of the remaining companies will be coming out of this.”

 

 

 

 

 

Ross Stores (ROST) CFO Michael Hartshorn said the company saw reduced buying costs as they continue to take advantage of opportunities to buy marked down merchandise

“Cost of goods sold was declined 45 basis points driven by a 45 basis points increased in merchandise margins and 5 basis points improvement each in freight and buying cost.  We continue [see] a really strong supply of excess goods in the marketplace.”

Ross Stores (ROST) CEO Barbara Rentler remains cautious regarding near term performance of the company due to the highly promotional nature of competitors 

There is ongoing uncertainty in the macroeconomic environment and, based on the current retail landscape, we expect the upcoming holiday season to be highly promotional.  As a result, while we always hope to do better, we believe it is prudent to maintain a conservative posture.”

Ross Stores (ROST) CFO Michael Hartshorn said they are seeing particular geographic strength in the Midwest

The sales performance was fairly broad-based across regions as we mentioned the Midwest was our strongest region which has been true over the past seven quarters, California our largest region performed in line with the chain and then as far as Texas, Texas was in line with the chain average for the quarter.”

Ross Stores (ROST) CEO Barbara Rentler highlighted the firms flexible buying strategy as a competitive advantage

The buyers have plans, it’s not just free-for-all they have their buying. There is a strategy, there is a plan, there is a plan by business segment of how much we think is appropriate. All that being said one of the benefits for model is that reflect able. So if we were to see a large amount of product and the classification or a business we weren’t planning on particularly driving and that product could help us drive the business, we would put money into that plan and we reflect. So that’s just one of the benefits of being a new up rise business.”

And their consumer skews to the younger side

“In terms of your point about the age we’ve always disproportionately attracted a slightly younger customers and that continues to be true. When you look at the growth of our junior’s business overtime that’s a good manifestation of that, but I would say that demographic for our new customers are pretty similar to the demographics from our existing customers.”    

 

 

 

 

 

Workday (WDAY) Workday CEO Aneel Bhusri says their software products continue to gain momentum with the Fortune 500

Aon and Saint Luke’s join our growing customer list of Financial Management customers that already includes Fortune 500 names such as Unum, Netflix, and J.B. Hunt, as well as large universities such as University of Texas at Austin and Yale.  Demand for our industry-leading Human Capital Management application suite also remains very strong. I’m excited to share that Workday was selected by FedEx, which is now our largest HCM customer. I’m also proud to share that General Mills and Denny’s both selected Workday in Q3.”

And customer satisfaction remains very high

For the past three years, we have earned a 97% customer satisfaction rating and this year that number increased to 98%.  We believe this level of customer satisfaction is far unmatched in ERP software.”

They believe they are taking market share from the legacy software ERP providers

“Another quarter of record revenues, billings and cash flow metrics was driven by strong momentum in financials and accelerating win rates over legacy incumbents.  Another quarter of record revenues, billings and cash flow metrics was driven by strong momentum in financials and accelerating win rates over legacy incumbents.”

And they said that positive customer references are helping drive their win rate

“In terms of competitive dynamics, I think we’ve gotten back to focusing on the technology differentiation. We’ve really pushed customers to do their homework and prospects to do their homework on reference ability.  Neither of our main legacy customers really have much in the way of large referenceable customers and as the customers do their homework, we tend to win the deal.”

Workday (WDAY) Workday CEO Aneel Bhusri says he isn’t impressed with his competitors updated product portfolio 

There were no new moves I think they are running out of new ideas. I didn’t see any moves.  We’re winning all of the large accounts and at the end of the day the models are all based on — all the pricing models are based on employee counts, so we just continue to win both in the mid-market with our mid-market strategy but the large accounts we just dominate and the reason is because we have proof points of getting these large companies into production, one after another. We have another big Fortune 100 company that just went live which we’ll announce in a couple weeks.  It’s about getting value and getting into production and we have that down and our competitors just don’t.”

 

 

 

 

 

 

 

Intuit (INTU) CEO Brad Smith said he is encouraged by the rate of growth in new customers

“We are generating strong new user growth in the online ecosystem. Over 80% of QuickBooks Online customers continue to be new to the Intuit franchise and total QuickBooks paying customer growth was also healthy.”

And they continue to benefit from an acceleration of individuals starting their own companies and the trend of the “gig economy” 

“Roughly 35,000 of our QBO subscribers are using the QuickBooks self employed SKU, which is up from 25,000 last quarter.”

Intuit (INTU) CFO Neil Williams said they maintain a disciplined capital allocation framework and so they won’t invest in anything which doesn’t generate a double digit return over 5 years

We continue to take a disciplined approach to capital management, investing the cash we generate in opportunities that yield an expected return on investment greater than 15% over five years.”

100 million consumers come to TurboTax.com during tax season

“And right now, we’re in the neighborhood of having almost 100 million people in the United States already coming to TurboTax.com. So it’s not about getting even more people to the website, it’s about getting more of that 100 million roughly between the US and Canada to convert into paying customers.”

Intuit (INTU) CEO Brad Smith said he is in favor of tax simplification

We are for tax simplification. We have been from day one, quite frankly, that’s what our business is.  Trying to take a complicated tax code and make it simple for people to comply with, and to be able to get their tax obligations done, and obviously, to get the money back in their pocket if they overpaid.”