IHS 1Q16 Earnings Call Notes

IHS’ (IHS) CEO Jerre Stead on Q1 2016 Results

Jerre Stead

Merging with Markit

Thank you, Eric. Good morning and thank you for joining us as we share our first quarter results and the announcement of our intent to merge with Markit, a leading global provider of financial information services. This combination is transformational for both of our companies and will create an unparalleled global provider of information and analytics, which will provide significant value for our shareholders, our customers and our colleagues.

We are creating a global leader in information analytics and solutions

“This transaction creates an information powerhouse with unrivaled information analytics and talent. We will have leading positions in the energy, financial services and transportation industry, among others. We have deep, senior and non-overlapping customer relationships across corporate, government, consumer and financial services. The rationale for this deal is very clear. By combining companies, we are creating a global highly scaled leader in information, analytics and solutions.”

Lance Uggla

Worked on this every day in December

“Yes. No, I think when I met Jerre and we started to describe our company, then we really did spend a month over December talking everyday, talking about our cultures, our employees, our customers and really getting to know each other’s business. And at the center and heart of each business are these unique content sets. And when I look at the world we are in today, it is all of our customers, both IHS and Markit’s, which are completely complementary are demanding more content available to them in every way possible from a cloud, from a feed, from a FTP feed, from a website”

Positioned ourselves to have unique content sets with big moats

“In the financial market, a lot of times, content is used for making the decision on a trading decision, pricing risk, something a little bit, a bit more short term, value an asset, buying an asset or selling an asset, so slightly different, but both rely on the same thing: unique content sets. So the one thing that we saw that Markit positioned really well is to have unique content with big moats that’s highly defensible and the leverage those into each of these services around there. “”

JS Earnings Call Notes 1.12.2016 – IHS

IHS CFO Todd Hyatt doesn’t expect their energy business to stabilize until the second half of 2016 and they see oil ending the year in the $50 range

“We expect continued pressure on our energy business in the first half of 2016 with some stability and improvement in the energy end-market in the second half of 2016.  Our experts are forecasting the price of oil to bottom in Q1 and to end the year in the $50 range.”

IHS CEO Jerre Stead said they are increasing their share buyback program, and at the same time, reducing stock options given to employees

“With capital allocation, we refocused our efforts on larger M&A transactions and started an ongoing allocation of capital through share buyback program and we committed to reducing the amount of shares being granted to employees by half.”

They saw a decline in revenue in data services sold to the energy sector

“In terms of our core industry verticals, resources, which include our energy and chemicals teams continues to experience declining subscription growth due to industry dynamics. Our overall resources’ organic growth was also negatively impacted by our non-subscription business.”

IHS CEO Jerre Stead said he plans on remaining CEO until the energy market bounces back

I will also tell you what I told our team, I am going to be here at least until we  get rid of the downturn and start enjoying the upturn of energy and oil prices, which might mean I am here 3 year or 4 years or 5 years or 6 years, I don’t know. But I am telling you, we will see it come back.”

With the lower energy prices, they’ve enjoyed particularly strong growth in the automobile segment

“Well, with autos we have seen growth across the entire portfolio. Growth has been especially strong in North America, as you pointed out. In the IHS legacy product where we have products that provide supply chain management capability in terms of production forecasting I mean that’s important information for part suppliers, for OEMs.”

Even with the lower energy prices, the firm delivered its strongest margin performance in the company’s history

“We increased Q4 all-in by 190 basis points for our highest margin reported ever as a public company on almost flat revenue. And so the teams are doing a great job and we feel really good about the confidence level to deliver that. That’s why I said earlier, when we see energy come back and it will we will be delivering great results across the board.”

IHS CEO Jerre Stead says his company cannot raise prices on their energy data services offering in the current environment 

So, in terms price realization and energy, I mean, obviously in this environment, we are not pushing prices.

IHS CEO Jerre Stead says this energy cycle is unlike any that has come before it

“Most of the energy price cycles have been these, if you will, high, down, back up. This is a deep U and we hope the bottom of the U as we said occurs and it’s for many, many reasons, different than ever before. We hope the bottom of the U, if you will, occurs in the first quarter.  If you go way out to 2020, our teams would be forecasting that there is actually going to be, as demand continues to increase, there will be a real tightening of pricing because the huge capital cuts that Todd has talked about where our key customers have cut 30% to 40%. So, I think it will be a different cycle than ever before.  as we do come out and pricing returns, because of the amazing amount of technology breakthroughs that have gone on with fracking, parallel drilling, etcetera, the price quality of returns of profit for the energy companies is at a lower level than ever before.”

Miscellaneous Earnings Notes 10.1.15


Jabil Circuit’s (JBL) CEO Mark Mondello on Q4 2015 Results

The world is changing at a frenetic pace

“The world is changing at a frenetic pace and we’re changing with it. Here are three simple takeaways of what’s driving our business today: engineering and technical expertise; addressing real problems with solution selling; and diversification of our solutions and the products we deliver.”

Apple is a 24% customer

“I don’t pay much attention to concentration issues around brands. I pay attention to concentration around risk. And I think we stated that Apple was a 24% customer, that’s public information.”


AZZ’s (AZZ) CEO Tom Ferguson on Q2 2016 Results

Electric utility market remains sluggish in US

“The electric utility market in the U.S. remains sluggish but we have benefited from strong international opportunities and a solid backlog.”


IHS’ (IHS) CEO Jerre Stead on Q3 2015 Results

Automotive and industrial segments performing well

“Automotive continues to be very strong, really good job across the Board, but the rest of the pieces in industrial are performing very well too. In fact I feel really good with the solid performance in total.’

Automotive customers are ahead of the game doing analytics to make better offers to customers

“the source of sales product that we were building that provided OEMs an ability to do more targeted marketing. What I would say about automotive is they’re probably as far ahead as anyone, any of the business in the company around doing analytics with the underlying information and providing more robust offerings to customers.”

We only expect modest trimming of budgets for energy companies in 2016

“There are some smaller players in the U.S. upstream that will be under pressure, but we do think most of the big companies have made most of their cost reductions and the IOCs and major independents are in the process, while they’re in the process of deciding their capital budgets for 2016 and we expect some modest trimming.”


Art’s Way Manufacturing’s (ARTW) Chairman Marc McConnell on Q3 2015 Results

The plight of a small ag equipment manufacturer:

“We are still noticing that the dealers are struggling as well and they are definitely not wanting to stock any of our inventory. So we do anticipate that the sales that we have, we need to have inventory on hand in order to capitalize on those sales.”…

“And so, as we’ve discussed before in April, orders got pretty slow and really price of milk in particular is one thing that was helping us for a period of time and when that went down as well as the other commodities, that’s when it really got quieter order wise for us. So the whole, both oil and gas and especially ag are really in a tough period. And it’s normal part of the cycle. This has happened since the beginning of time, it seems like in the ag industry. And so we are preparing in such a way that we will be able to sustain a long prolonged period of slow sales.”…

“We’re fortunate to have a very strong capital position. We have good relationship with our bank. We are focused on keeping a lot of availability in liquidity with our banks so that we don’t get into any point of vulnerability. ”


Paychex’s (PAYX) CEO Martin Mucci on Q1 2016 Results

Startups are good at selling the low end but cant match our scale

“I think we continue to see good results from a selling perspective and so while they’re out there, I don’t think anyone has — no one has the sales team that we have, the distribution model and the number of sales people and the effectiveness. And so on the low end I think they sell very effectively and the low end being size”

Seeing continued strong employment growth in small businesses

“we’re seeing continued — particularly in the small business under 50, we’re seeing continued better employment growth than prerecession levels of 2004 and so — and it’s down a little bit from last year, but it’s consistently above that level. So we’re feeling like a steady improvement in small business formation and employment hiring ”


Diamond Foods’ (DMND) CEO Brian Driscoll Q4 2015 Results

Expanding capacity for kettle chips

“we’ve seen huge growth in Kettle and we’ve gone from being — our plants being 60% utilized to being basically filled. We are in the process of ordering new fryers and putting them in and our total CapEx this year is likely to be – whereas the year just ended, our CapEx was in the mid-20s, 27 million, our CapEx next year is likely to be in the mid-30s to cover the cost of that kind of expansion.”

It’s a tough market for acquisitions

“I think it’s a tough market. I think everybody says that, it’s a tough market. Valuations are high but maybe that could change with this current ongoing correction, who knows but I think it is a difficult market but we are looking for things that fit our profile. And we’re pretty confident quite frankly that we’re going to find something, maybe something more modest in size that will fit the profile and will work for us, inside what we can afford to pay.”

JS Conference Call Notes MON, IHS, ACN

Jeremy S., an investment analyst in Southern California, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Jeremy has read this week.

 

 

Monsanto (MON) CEO Hugh Grant says merging their business with competitor Syngenta would create the world’s largest agricultural seeds company and gain significant synergies

“This would give us an even more precise approach to every acre creating immediate and long-term revenue growth opportunities through a diverse range of optimized, integrated solutions. Near term by combining Syngenta’s leading crop protection portfolio with Monsanto’s leading seeds footprint we would have the unique ability to provide leading science based recommendations of integrated seeds, traits, and crop protection solutions.  This combination would also allow us to more fully participate in the value creation from our crop protection solution recommendations. “

He added that big data will play an increasing role in precision agriculture in the coming years

“Longer term and unique to Monsanto, we will be able to unlock a new data driven approach to provide farmers even more valuable real time insights about their crops with our Climate platform. The information will provide actionable crop protection recommendations to farmers to maximize productivity, while ensuring inputs are applied in a precise manner to meet society’s broad goal to preserve and protect our environment.”

Monsanto (MON) CEO Hugh Grant said he expects to double ongoing earnings per share by 2019.  This type of pledge has the potential to be dangerous as it can cause perverse incentives by the salesforce to channel stuff or it can force senior management to stick to their publically stated strategy as opposed to adapting to shifting market dynamics

“Optimized spending and the milestones that we delivered this year reinforce our confidence in our five-year plan to more than double our fiscal year 2014 ongoing earnings per share by 2019. While we believe the combination with Syngenta as optimal to several customers for the long-term and would drive even greater growth in long-term earnings per share, our current portfolio and our pipeline leads the industry and provides multiple levers to drive our long-term growth projections.”

Monsanto (MON) COO Brett Begemann said the agricultural sector remains challenged

“There is no doubt it has been a tough year with the macro pressures facing global agriculture, namely our retreat and corn acres, currency and pressured commodity prices.  We fully expect the macro environment to recover and are well positioned to participate when it does.  That said, as we develop our operational plans for next year, we are taking a clear eyed view and we expect that many of these headwinds will continue into fiscal year 2016.”

 

 

 

IHS CEO Jerre Stead said the energy market they sell their software into saw softening demand during the quarter due to the recent downturn

“In terms of our core industries and horizontal workflows , resources which includes our energy and chemicals team, continues to experience moderating subscription growth due to industry dynamics.”

And he elaborated that there is plenty of room for improvement in streamlining the company’s operations

“It’s clear that we’ve got too many cooks in the kitchen.  There is not clear simple lines of accountability or simple way to think about it is I want to be able to go to one person and get the answer everything of we need to do and will do on a global basis on the products in each of those industrial areas”

IHS CEO Jerre Stead is taking steps to reduce share dilution of the company due to employee stock option plans

In addition to improving shareholder return from planned stock buybacks, we’re also planning to reduce dilution from shares granted in our stock based compensation program. We’ve made good progress in reducing our stock based compensation expense over the last year and half. We remain committed to continuing this effort and will work to reduce our 2017 annual share purchase by approximately half of our current year level.  Due to the accounting treatment of stock based compensation expense, which would cost the expense of the underlying share grants to be recognized over the vesting period, we expect annual declines in expense over the coming years in the high single digits.”

He wants the company to remain financially disciplined on acquisitions

“I don’t want us to get fooled like I’m watching some other companies today with cheap money buying something that’s accretive because the money is cheap, that wouldn’t be long term.”

 

 

 

Accenture (ACN) CFO David Rowland said the company remains a preferred customer for some of the world’s largest corporations 

“We had 12 clients with bookings in excess of $100 million, given us 33 year-to-date, which signifies the unique and trusted relationship that we have with many of the largest companies in the world.”

And the firm saw continued strength in their technology and healthcare digital practices

“Turning to the operating groups, Communications, Media and Technology continued to lead all operating groups was 17% growth in the quarter. While growth continued to be broad-based, it was most significant in North America.  The drivers across CMT continued to be digital-related services, cost rationalization, several large transformational projects and demand for network-related services.  Clients continue to be focused on digital-related services and operational effectiveness as they position themselves to be more competitive in the marketplace.”

One area of their business that has been growing substantially over the last few years is building mobile apps for corporate clients

“With Accenture Mobility, it is now one of the world’s leading developers of mobile apps, leveraging the capabilities of our global delivery center. We have now developed over 1000 apps across nearly all industries.”