Robert Half 1Q17 Earnings Call Notes

Harold Messmer

Wait and see approach to hiring should fade as economic optimism grows

“Thank you, Keith. Moderate U.S. economic growth in the range of 1.9% to 2.3% is forecast for 2017. Notwithstanding the slower first quarter start, 1.4% GDP growth according to The Wall Street Journal’s monthly economic forecasting survey; recent data from several sources, including the NFIB, PMI Services Activity Index and the University of Michigan Consumer Sentiment Index, all point to a more upbeat business outlook. We believe the wait-and-see approach to hiring that has affected our results to date should fade as economic optimism grows.”

Talent shortages help us

“As labor markets continue to tighten, particularly for our professional occupations, we will benefit from our decades of experience helping clients find the right candidates even amid talent shortages. Outside the U.S., we’re encouraged by the opportunities afforded by improving economic conditions, particularly in Continental Europe.”

March better than Feb better than Jan

” if you simply look at revenues per day, in the U.S., temp, they got gradually better even in the U.S., February versus January, March versus February. When you look at year-over-year growth rates for temp U.S., they were pretty constant. So on an absolute basis, we did see improvement in March in temp in the U.S. and we certainly saw improvement non-U.S. both in terms of year-over-year rates as well as absolutely. So I want to be clear that temp U.S., March, on an absolute basis per day, was better than January and February. Just when you compare it to a year ago, the growth rate for us was about the same. For perm, March was better not only on an absolute basis, but it was better year-on-year as well”

You had a fairly anemic GDP growth rate in Q1

“Tim, I would second what Keith said. We’ve always been somewhat paranoid. As you probably know, you always worry, “Are there things you could be doing better,” but my own view is that it’s basically macroeconomics. You had a fairly anemic GDP growth rate this first quarter. The projections are for great improvement coming up and we hope that’s the case. And if it does occur, we certainly expect to do a lot better. So we’ll see.”

While people remain optimistic they are still waiting to get more comfort on policy

“I definitely think it’s a GDP issue. And while people remain optimistic, they’re still waiting to get a little bit more comfort on the policy front and so forth before they pick up their activity levels. So we remain cautiously optimistic in that regard.”

Keith Waddell

BLS temp data samples different pool

Well, first of all, the BLS data is very blue collar, manufacturing, light industrial driven which we have virtually zero exposure to. I’d say second of all, there’s never been a large correlation between what happens with BLS data then what happens with our data.

Generally labor market is tight

” I’d say there’s not a lot of change in tightness. Generally, it is tight. The unemployment rate that gets all the headlines is the U3 unemployment rate. If you look at broader rates, U5 would include those not looking for work. U6 would include those that would — that are working part-time that want full-time. Those broader measures of unemployment are much higher and not as sanguine as is the case with the U3 rate. So while supply has tightened a bit, it hasn’t changed that much.”

Middle market doesn’t use H1-Bs

“our middle-market clients, there’s virtually no demand for H-1B-type candidates to work on their projects. So there’s no direct impact. But to the extent in the marketplace, clients have relied on providers that source their people in that way. Those providers won’t be able to source in that way and frankly don’t have the recruiting infrastructure in the short term to do that. So we think that would be a net positive to us. There is some discussion about, well, to the extent H-1Bs aren’t part of the U.S. available workforce, the remaining workforce becomes more scarce for the remaining providers. ”

GDP growth has been anemic and could continue with policy uncertainty

“, GDP growth has been anemic and that’s expected to continue this quarter where we talked earlier about — we’re talking sub-2%, 1.5% type GDP growth rates. And I think the policy uncertainty issue is, does it continue this gap between the soft data and the hard data, the optimism, the sentiment data versus real economic activity? And I think the longer the policy uncertainty exists, be it tax reform, be it regulatory reform, be it infrastructure, I think that uncertainty certainly defers the period of time that you see actual improvements in business activity. ”

We’re not unique in the gap between hard data and soft data

“We hope it’s the beginning of many good months to come, but I don’t think we’re unique when you read almost every day and you see in the press virtually every day, the company is talking about the gap between hard data and soft data, sentiment optimism on the one hand and actual levels of activity on the other. But the good news for us and I guess relative to where we sat 90 days ago, I would tell you our people are moderately more optimistic. And so they’ve actually seen some signs of improvement at least for 1 month and it happened to be the last month in the quarter. So relative to 90 days ago, we’re moderately more optimistic, but it was 1 month.”

Hertz 1Q16 Earnings Call Notes

Hertz Global Holdings (HTZ) John P. Tague on Q1 2016 Results

Excess fleet capacity pressured pricing

“even though our fleet level was on plan, RPD remained under pressure as industry pricing struggled with what we believe was a base level of excess capacity that was then further exacerbated by the mild winter affecting insurance replacement demand and somewhat weaker business travel trends.”

Seeing improving trends now though

“We believe the pricing pressure we’ve experienced is temporary, as evidenced by recently improving trends as we move towards the peak season. “

Decided not to buy back shares given challenging revenue environment

“we elected not to repurchase additional shares of Hertz Global Holdings during the quarter.
While we clearly believe our stock is significantly undervalued, we concluded that given the challenging revenue environment in the U.S. industry in the first quarter, it would be prudent to take a cautious stance for now. Should recently improved pricing trends continue as we expect they will, we will next assess the cadence of our buybacks following the Hertz separation.

Spinning off equipment rental business

“. As you can see from Tom and Larry’s remarks, we are now at the long-awaited eve of separating the HERC business and moving these two companies forward. I think the progress Larry and his leadership team are making outside of the transitory noise of oil and gas is evident.”

historically it’s been difficult to differentiate brands in this business

“differentiation amongst brands is historically a struggle in this business, but there are clearly reasons to have multiple brands. So I think going forward, both in terms of customer experience and brand positioning, we’re going to continue to push Hertz up as the premium rental car brand in the market, while creating appropriate value positions for the other brands that address their own segmentation”

I think it’s too soon to call an inflection point but things are improving

“ I think we expect things to improve in the second quarter, but I think it’s too soon to call it an inflection point. I would expect to see – be more satisfied in the third, but I’m not prepared to say that’s a hockey-stick inflection point. It’s simply things improving. I do truly believe this is transitory. I think all the industry participants are suffering from the consequences of this pricing environment, and I believe this is largely an industry that’s responsible to capital returns to investors.”

Residual values have moderated not collapsed

“So when you think about what we’ve experienced over the last several months, you’ve really got the moderating of a very long bull cycle on residual values. It’s moderating. It’s clearly not a collapse. It’s a moderation. “

moderate level of concern for European tourism from the US

“ As we went through the first quarter, we really didn’t see anything. Previous events such as were experienced in Belgium had turned out in retrospect to be more moderate than we thought. But we are watching given that this is a peak-booking season for the summer as that develops. So I think there’s a moderate level of concern recently in terms of demand, particularly from the U.S. market to Europe, but nothing that we’re prepared to extrapolate or that we believe can’t be mitigated.”

It’s hard to forecast since booking cadence is very short in this industry

“I can appreciate why we’d all like to know the answer to those questions, but we’re not in a position to provide specific guidance there. One of the difficult things about revenue visibility in this industry is the extreme shortness of booking curve, which is partly a function of pricing structure and excess supply. I think it could be a much longer more indicative booking curve than it is, but for the time being most of that activity is incurring within 30 days of pickup. So, I don’t know that – booking trends I would say are positive, but the data sample is small when you go beyond 30 days.”

Avis 1Q16 Earnings Call Notes

Avis Budget Group (CAR) Larry D. De Shon on Q1 2016 Results

Q1 was full of challenges

“The first quarter was full of challenges. Some of which we expected and others that wound up being more difficult than we anticipated. Softness in commercial volume continued, while in-bound travel to major leisure destinations in the United States was lower than normal. The lack of a major winter storms also meant that rental cars that would normally be utilized to meet insurance replacement needs, found themselves at airports instead.”

An unusually weak spring break

“pricing in the first quarter was tougher than we thought it would be. We now know that our soft President’s week, particularly in markets like Florida and Arizona was the start of what turned out to be an unusually weak spring break. Coupled with the soft commercial demand, weak inbound volume and a mild winter, fleet was abundant across the industry and pricing finished down 5% year-over-year in the quarter.”

We don’t think it’s a trend though

“our view is that this unusually soft pricing event we experienced in the first quarter is an anomaly, not a trend or a new normal. Our year-over-year comparisons have been improving fairly significantly over the last few months. March was better than February, April was better than March, and May bookings are indicating a continuation of the favorable pricing trend.”

Not changing guidance, expecting improvement for rest of year

” as I mentioned in my opening remarks, our full-year EBITDA guidance remains unchanged. We have reduced our full-year pricing outlook in the Americas to reflect our first quarter results and more gradual improvement over the remainder of the year.”

Summer is looking significantly better

“the way I would characterize it is, you start with February ended worse than what we had thought. And then as we went into March, although March improved over February, March was still not what we had planned for it to be. Then as you go from March into April, April improved again over March. And then as we’re looking at May bookings, May is also improving over April. So, we haven’t turned positive as of yet, but we’re getting very close to it at this point. And we’re very optimistic about what we’re seeing for June and summer bookings are looking strong and rate is looking significantly better.”

15% of summer bookings are taken

“When you take a look at over summer, at this point probably 15%, I’m going to estimate, of our bookings are probably taken at this point. And once again, the indications from those bookings are that both volume is coming in strong as well as rate continues to improve. So, there’s nothing in what we’re seeing at this point for May or for summer, although summer is still pretty early, that gives us any cause for concern.”

Waste Management 1Q15 Earnings Call Notes

Wont overpay for assets

“On the acquisition front, we continue to have discussion with sellers, but we’ll remain disciplined and not overpay for assets. If we cannot identify core businesses to acquire at reasonable prices, we’ll buy the business that we know the best, ours, by doing a share buyback. Even if we do identify acquisition targets at reasonable prices, we will still purchase at least enough shares to offset dilution and we’ll begin buying those shares in the second quarter.”

Apparently we generate more trash in the summer

“As we move through the second quarter and see the seasonal upturn, we expect to see continued improvement in our volumes. Combined with our focus on cost and pricing, this should lead to continued growth in earnings and free cash flow.”

Improving volumes in profitable lines

“seeing improving volumes in our most profitable lines of business. We’re seeing declining volumes in our less profitable lines of business like recycling and residential.”

Residential is competitive

” I think residential has always been a very competitive line of business. Look, those are big contracts, big slugs of revenue, and generally, you’ve got a lot of different bidders. So, there’s always been aggressive players on the residential side. Frankly, I would say that we’re seeing a little bit of more stability on the residential side, as folks that have taken those low-margin contracts from us over the last few years start to realize they can’t make a lot of money on them.”

CPI affects pricing

“I don’t think that we’ll see a significant change in CPI. But when we look at our pricing programs, we try to look at them holistically, and if CPI is lower, then we just have to get those dollars from somewhere else. And so if we get a bump from CPI, that would be great. But if we don’t get that bump, we’re just going to have to pull those dollars from somewhere else, and that’s what we’ve been doing the last few years, and that’s what we’ll do this year.”

Weak commodity prices impact recycle volumes

“as we’ve talked a lot about this morning, the negative revenue impact of recycle commodity prices and recycle volumes. And that was a negative $70 million”

Customers need to realize that we need to get paid for recycling

“I think that’s what customers need to realize is that we’re not the only ones rationalizing assets. The industry is rationalizing assets. And unless we can work out a way where recycling is profitable over the long term, there’s not going to be recycling. And customers certainly don’t want to live with that. So, we just need to make sure that the customers understand that if they want glass recycled, we need to get paid for it. We actually lose or we lost in the quarter $6 million by recycling glass. Long term that cannot be sustainable for Waste Management. So, we need to work with the customers to get them to understand the mix issues, to understand the commodity markets so that we can make a long term viable business out of recycling.”

We’ll live up to the contract, but we’re not going to be there when it ends

Most of these contracts are long-term contracts and – look, it’s a long-term contract; we signed the contract. We will live up to the contract. But what they need to realize is we’ll live up to that contract, but we’re not going to be there when the contract ends, and nobody’s going to be there when the contract ends.”

There’s one business that we know best and that’s ours

“As we’ve got into deeper discussions with sellers, we found out that some of them had bigger timing issues than we thought and some of them have higher pricing expectations than we thought.

And so – look, that doesn’t mean that we ultimately won’t buy those businesses, but it might mean that it’s going to take us longer to buy those businesses, and if that’s the case, then we do need to be out in the market buying back our stock because, look, as I said, that’s the business we know the best. We’re never going to pay a multiple higher than our own multiple because there’s one business we know real well and that’s ours.”