Miscellaneous Earnings Call Notes

Yahoo’s (YHOO) CEO Marissa Mayer on Q2 2016 Results

Marissa Mayer is proud of the last four years

“As we work to conclude the strategic alternatives process, this groundwork will serve as a solid foundation for Yahoo!’s next chapter. I am proud of what this company has achieved of these past four years. I remain committed to our team and our company and I continue to be optimistic and passionate about the future of Yahoo!”


W.W. Grainger (GWW) Q2 2016 Results

Laura D. Brown – Senior Vice President-Communications & Investor Relations

June selling volume down 3%

“There were 22 selling days in June of 2016, the same as 2015. Company sales were flat in June versus the prior year. The sales performance included 4 percentage points from acquisitions, offset by a 3 percentage point decline from volume and a 1 percentage point decline from price. In the United States, June daily sales decreased 3%, driven by a 4 percentage point decline from volume and a 1 percentage point decline from price, partially offset by 2 percentage points from intercompany sales, primarily to Zoro. June customer end market performance in the United States was as follows: retail was flat; light manufacturing, government and commercial were down in the low single-digits; heavy manufacturing was down in the mid-single digits; contractor was down in the high single-digits; reseller was down in the mid-teens, and natural resources was down in the high-teens.”


Mattel’s (MAT) CEO Chris Sinclair on Q2 2016 Results

Kevin Farr

Brexit will have minimal impact on current results

“Brexit will only have a modest impact on our full year results. Based upon current trends, we believe the negative impact from foreign exchange will be roughly $0.02 to $0.05 of EPS for the year related to Brexit.”


QUALCOMM’s (QCOM) CEO Steve Mollenkopf on Q3 2016 Results

Favorabale demand for chipsets, especially in China

“In QCT, the favorable demand trends for our new chipsets across the mid and high-end smartphone tier, especially with the top 10 vendors in China are helping to deliver improved financial performance. We are also seeing incremental demand for our lower tier chipsets in China versus our prior expectations driven in part by our differentiated all mode and modem leadership.”

5G deployment may have been pulled forward to 2018/2019

” In general, we are obviously trying to drive 5G as quickly as we can. It’s an area which we think to be a strong player in 5G, you have to be a strong player in 4G, 3G and WiFi and consequentially we think that we will maintain a very strong IP position moving forward. The standards bodies are working on that right now. So, I think we have a lot of visibility into the strength of our submissions as well as to how the industry is unfolding. I think in general, if you’d have asked me that question, a year ago, I would have said that it would have happened closer to 2020. Certainly over the last year and accelerating here over the last quarter there has been a real pull to push that in or to pull that in closer to 2018/2019 timeframe depending on what the deployment is.”


Cohen & Steers’ (CNS) CEO Bob Steers on Q2 2016 Results

Joe Harvey

Markets sending seemingly inconsistent signals

” Markets expressed seemingly inconsistent expectations as the quarter progressed. The 10-year treasury yield declined to 1.5%, suggesting slow growth, disinflation and a flight to safety amidst Brexit concerns. Yet, oil and commodity prices continued to rally. These conflicting signals are hard to reconcile, especially in light of our view that inflation should accelerate towards 4% into 2017, driven by rising energy, rent and food prices. While part of the inflation bump should be temporary, rising wages, prospects for additional central bank and fiscal stimulus and a likelihood that commodities have entered a new bull market, suggest to us that the positive market performance in real assets will continue, while the fixed income bull market has less and less room to run”

Brexit will long term be good for the UK

” I think that Brexit over the long-term will be good for the UK. It will result in some short-term pain, probably a brush with recession. But long term, I think it’s good that they can control their own destiny apart from being tied to Europe. And in terms of commercial real estate in the UK, we are expecting prices to decline anywhere from 5% to 15% or 20% depending on the property type and the biggest declines are being expected in the office market. ”


D.R. Horton (DHI) David V. Auld on Q3 2016 Results

David V. Auld – President & Chief Executive Officer

Optimistic about CA but also Texas

“Bob, the growth we’re looking at there is at a new price point that hasn’t existed out there. And we feel very optimistic based upon the land that we’ve been able to put in front of that program. So do we feel more optimistic about California than the balance of the country? Absolutely not. I think Texas continues to be strong and our Southeast area just continues to outperform”

Yahoo 4Q15 Earnings Call Notes

Yahoo! (YHOO) Marissa A. Mayer on Q4 2015 Results

In a turnaround you must literally turn around declining revenue

“In a turnaround, you must literally turn around declining revenue and get it to grow. There are two ways to do that: by returning current business lines to growth, or by adding new business lines that grow. When I arrived at Yahoo!, I reviewed all the lines of business. Each one was in decline and had been for years.”

We want to be known for discovery

“Let’s go into more depth on each of these. Our vision for Yahoo! isn’t changing and is rooted in our beginnings as Dave and Jerry’s Guide to the World Wide Web. To consumers, we want to be known for discovery. We are guide to digital information discovery. We inform, connect and entertain them with our Search, Communications and Digital Content products. Search, Communications and Digital Content form a three-legged stool for Yahoo!”

We have 1B monthly users

“Our total user population exceeds 1 billion monthly users. While we have one of the largest audiences on the web, 2016 is about growing how much each user uses Yahoo!, in other words, engagement. ”

Addressing “blatant falsehoods” in the press

“I want to take a moment to discuss some blatant falsehoods that have been circulating in the press about the company’s spending. I have found these untruths to be upsetting, and I’m sure our investors have as well. And while we do not have time on today’s call to address all the inaccurate information, I want to touch on a few. For example, there have been reports of a $7 million holiday party and a $450 million spend on food over the past few years at the company. Both numbers are exaggerated by more than a factor of three. Our holiday parties globally cost approximately $150 per invited attendee. Our food program is extremely well run and all of our employee perks are standard for our industry, in line with other companies in our area and generally run less expensively here than elsewhere.”

Tech is an acquisitive industry

” tech is an incredibly acquisitive industry, and when I first arrived at Yahoo!, I felt it was very important to do many small talent acquisitions, in terms of really bringing new talent, new ideas, more entrepreneurial spirit into the business. We’ve done a good job bringing that talent here, and we have a lot of entrepreneurial spirit here in the company. And so we’ll continue to hire and we will continue to acquire. In the case of exceptional talent, I feel the need is slightly less acute now, because we have really excellent teams helming each of these areas that I have a lot of confidence in.”

We think search is a lot different in mobile than in desktop

“We think that the profile of how mobile search evolves will be somewhat different than web search evolved. Obviously, the web is really large. In some ways it’s nearly infinite. And so crawling all information that’s out on the web is publicly available, that’s privately available is something that is really challenging and very capital intensive. In Mobile search, it’s much more about your personal information. How can we make you more efficient, more effective, and know where you might want to be going, how to get you there most efficiently, what apps can help you accomplish the task that you ultimately want to accomplish? The search space is basically much smaller, the required disk space, the conversation space is smaller. “

Miscellaneous Earnings Call Notes 10.22.15

Advanced Micro Devices’ (AMD) CEO Lisa T. Su on Q3 2015 Results

Not anticipating that Windows 10 will drive PC refresh

“While we are not anticipating Windows 10 will drive a dramatic near-term PC refresh cycle the continued adoption of Windows 10 which has already been installed on more than 110 million PCs to date, provides a great opportunity for AMD over the coming year based on a semi-consumer and commercial refresh cycle environment”


Suntrust Banks’ (STI) CEO Bill Rogers on Q3 2015 Results

We’ve been in the lower for longer camp for a long time and think it stays that way in ’16

” We, as you know in our case, we have sort have been in the lower for longer camp for some time and set ourselves up appropriately for that type of an approach. As we look forward into ‘16, I think also lower for longer stays, I think if there are Fed increases, they will be very deliberate and the pace of rate rise will probably be slower now than the market had been thinking six months ago.”

Capital Markets activity should be better this quarter

“M&A had another really good quarter and pipelines are still good there. The volatility numbers are in sort of high yield bonds and the equity sales and trading and that’s better. Spreads have come in. I think things will get done more this quarter than they did last quarter if things stay stable. And based upon what I see in terms of our pipeline, I feel good about our pipeline”

CCAR has changed the way that the whole banking industry is thinking about risk

“I think one of the other benefits also that you see for SunTrust and perhaps for the industry overall is the benefit of CCAR. The CCAR has changed the way that companies think about their overall risk. They apply a stress test to all their portfolios now and think about how portfolios would behave during a stress test.”


Kansas City Southern’s (KSU) CEO David Starling on Q3 2015 Results

Volume continues to improve in October

“volume so far in October continue to improve. And subject to ongoing uncertainty in energy markets, we feel good about the trajectory of demand as we head into the end of 2015. Through the close of business, Wednesday, average daily carloads for October were running about 1% higher than September and 1% higher than October of last year as well.”

Business demand still feels very good to us

“business demand still feels very good to us, with the obvious caveat about the uncertainty in energy markets, which you have seen across the entire rail sector, have made it more difficult to forecast demand and provide guidance.”

Mexico is probably linked to the US, but they’ve done a good job managing their inflation and unemployment rates

“I think, Mexico ends up being fairly tightly linked with the U.S. economy, given the amount of goods that end up going north into the U.S. But they’ve done a really good job managing their overall inflation rate, which is now running below 2%, unemployment is below 5%.”


Hasbro’s (HAS) CEO Brian Goldner on Q3 2015 Results

Toy industry growth is strong ytd

“The trends that we see and the data that we have would indicate that the Toy industry year-to-date is up high-single digits, and we see that as boding well as we get into the holiday season and continues our trends.”

Labor is the biggest cost input to our COGS and it’s up in the double digit range

“The single biggest cost input to our cost of goods is labor. And we continue to see labor inflation rates in the double-digit range. We have seen a slight decrease in the cost of certain types of resins over the period since the end of 2014. But they tend to be more nominal and they run in arrears to whatever the petroleum or gasoline costs prices are out there as you know.”


Flextronics International’s (FLEX) Mike McNamara on Q2 2016 Results

Partnering with Nike for connected products

“Last week, during NIKE’s Investor Day, NIKE announced a partnership with Flex to accelerate the introduction of advanced innovation to NIKE’s manufacturing supply chain. Working together, NIKE and Flex will deliver innovation that enables product to reach consumers more quickly with customized solutions and increased performance innovations.”

There’s an electrification of the world going on and we can help mechanical companies adopt that

“the amount of electrification in the world, the amount of smart products in the world that are going into what’s not typically electronic products that are now moving forward, whether it’s anything from a shoe to a shirt to a door lock is tremendous. So you’re getting a tremendous amount of this electrification of the business. And as we look forward, the value to us is if we can create more value for these customers whether it’s automation or engineering or making a non-connected product connected or providing electrification where they’re more traditionally a mechanical type company”


Zions Bancorporation’s (ZION) CEO Harris Simmons on Q3 2015 Results

Energy chargeoffs are from borrowers that were already weak in the last cycle

“the charge-offs have fundamentally been borrowers that were weak in the last cycle, they’ve been kind of limping along, and for whatever reason, you know, we have not been able to get totally out, and this recent downturn was just kind of another very difficult blow to them.”

Restraining loan growth because concerned that we may find ourselves in another downturn before things get better

“I think that, you know, I for one have a concern that we may find ourselves set [ph] into another downturn before we see the economy strengthen a great deal again, I mean. So we’re trying to be very careful.”


Hawaiian Holdings’ (HA) CEO Mark Dunkerley on Q3 2015 Results

Hawaiian airlines has had a tough time getting flights in on schedule

“It’s been a poor summer operationally as reflected in our having recently posted our worst monthly punctuality in over a decade. The culprits have been several; the combination of a burgeoning flight schedule of Honolulu and airport construction has meant that during the peak hours of the day there have been insufficient gates. This has been exacerbated by congestion in customs, resulting in our not being permitted to de-plane arriving international passengers promptly. And lastly, an abrupt change in the traffic control procedures at Honolulu gave us no opportunity to make schedule changes to address the lengthen block times that have resulted.”


Yahoo! (YHOO) Marissa A. Mayer on Q3 2015 Results

Experiencing continued revenue headwinds

“our Q4 outlook, which Ken will return to later, is not indicative of the performance we want. While there are some well-known headwinds, year over year and even quarter over quarter like the loss of the Alibaba TIPLA, we are also experiencing continued revenue headwinds in our core business, especially in the legacy portions”


ACE’s (ACE) CEO Evan Greenberg on Q3 2015 Results

Underwriting environment continued to grow more competitive

“I want to now say a few words about current commercial P&C market conditions. The underwriting environment continued to grow more competitive in the quarter for our commercial P&C business globally. With some exceptions, price declines accelerated modestly. They were varied by class of business and geography.’

Large account more competitive, wholesale and property

“Large account business, particularly shared and layered is more competitive than midsized. Wholesale is more competitive than retail and property more so than casualty related”


Kimberly-Clark’s (KMB) CEO Tom Falk on Q3 2015 Results

The rate of currency deterioration hasn’t been as severe as it was

“The rate of currency deterioration hasn’t been as severe as it was, say, a year ago. On the other hand, there’s still some opportunity for price in some markets.”

Not seeing trade down in EM

“so far we are not seeing as much as a trade down as you would think. And we are still seeing — we launched boy/girl diaper pants in some of the super premium kind of tiers. We are seeing good response and growth there… particularly the economies that are in recession like Brazil and Russia, we are watching that see how the consumer performs and make sure we got the right offer, but we are also seeing really good innovation. Mom still wants the best for her baby.”


Texas Instruments, Incorporated. (TXN) Q3 2015 Results

It’s a weak environment but some segments were stronger than we expected

“our revenue declined 2% from a year ago, and we obviously would describe that as a weak demand. That’s actually similar to what we saw last quarter. But, inside of that, certainly it was stronger than what we had expected. There were a couple of areas that were stronger than we had expected. Wireless infrastructure and industrial were both stronger than what we had expected. ”


Kinder Morgan’s (KMI) CEO Steve Kean on Q3 2015 Results

By 2030 gas should be 39% of electric generation mix

“Its projected increase from today’s level of 76 Bcf a day to about 110 Bcf a day by 2025, that’s an increase of 40%.”

” If you look at the 15 mix of generating output and this is according to the EIA, 32% is gas and 33% coal. For those of you who have been in this industry a long time or followed it you know that that represents a dramatic shift to the positive for natural gas. If you flash ahead again these are EIA numbers to 2030 their projection of the mix of generation is 39% gas, 18% coal’

Renewable energy will need natural gas facilities as backup

” reliable flexible natural gas facilities are absolutely necessary to back up wind and solar. So to sum up the idea that we could move directly from coal to renewables without increasing natural gas usage for electronic generation is an unrealistic pipe dream with the substance and the pipe being legal only in Colorado and Washington State.”


Danaher (DHR) Thomas Patrick Joyce on Q3 2015 Results

Seen some incremental slowing, but in pockets

“Overall, we have seen some incremental slowing in the macro. That being said, it’s in pockets. There’s some pockets regionally where we’ve seen some of that slowing, clearly, and in some of the more industrially oriented markets.”

China is still one of our better markets

“we’ve actually seen China, while slowing incrementally, it’s still one of the better markets where we play today. Our growth rates continue to be very good in a number of our businesses. ”

Andrew Sohn: LMT, YHOO, SFS, UA

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.

 

 

Lockheed Martin (LMT)

 

Acquiring Sikorsky Aircraft

 

The first strategic action we announced is our signing of a definitive agreement to purchase Sikorsky Aircraft.

 

Potential spinoffs or sales in the near future

 

The second major action is the commencement of a strategic review of our government IT infrastructure services work at Information Systems & Global Solutions and of our technical services work at Missiles and Fire Control. The strategic review will address the changing market dynamics affecting these businesses and will help us determine how to best position them for future growth and is expected to result in a spinoff or sale of the businesses.

 

Sikorsky catered to similar customer base, possible synergies

 

Some of the important strategic benefits of this acquisition are that Sikorsky has familiar customers. This familiarity will assist the integration process through utilization of similar knowledge and interaction with common customers.

 

Macroeconomic factors also helped acquisition of Sikorsky

 

Their strong aftermarket business is also expected to provide a long-term source of earnings to the Corporation and another lever of value creation. The opportunity to access capital in today’s historically low interest rate environment is another significant contributor to the rationale and value creation of the acquisition…Sikorsky footprint in the commercial aviation segment is well-established with the extensive activities supporting the oil and gas industry. While this segment has been under recent pressure due to low oil prices, it is expected to recover in the future and add value to the Corporation. We believe these current pressures enable us to make this acquisition at a low point in the economic cycle.

 

 

 

Adjusting operating profit and EPS guidance

 

On Chart 20 we provide our updated outlook for the year. We are leaving both orders and sales unchanged at this time… We are increasing our segment operating profit by $75 million due to our strong performance through the first half of the year and as a result of our increasing profit, we are also increasing our earnings-per-share guidance by $0.15 to a new outlook of between $11 and $11.30 per share.

 

 

 

Industry has more competition, and customers looking more at prices

 

As you know, there is a lot more competitors that have come into the marketplace and our customers’ priorities are changing and what they’re looking at more – they’re much more price-sensitive and so the elements of our business predominantly will be in the work that we’re doing for civil agencies, IT infrastructure type services.

 

 

Sikorsky offers more leverage through cross-selling

 

I think in particular the international sales market is an interesting one for us where we – through the combination of our portfolios coming in having a discussion about the security needs of our international customers whether it’s F-35 Littoral Combat Ships, now Sikorsky helicopters is a much much more powerful discussion than what I believe the current parent could have in terms of bundling products and services together to go into the international marketplace.

 

 

Yahoo (YHOO)

 

Tailwinds last Q3, not so much this time

 

You may recall, in Q3 of last year, we had a number of beneficial factors that led to a very good quarter. These included the World Cup, new patent license royalties, and some accelerated fees around the Alibaba IPO. As a result, we expect to see some pressure in terms of year-over-year trends in Q3. We expect to be able to continue to show strong top line revenue growth in terms of GAAP, but our revenue ex-TAC and adjusted EBITDA will likely be under pressure year-over-year.

 

Focusing on expanding market share

 

We’re also making important investments for the long term. We are investing heavily to grow market share through both traffic acquisition and marketing. Two examples are our recently announced partnerships with Mozilla and Oracle, both are large search deals that we believe will enhance and stabilize our market share. But they obviously run at a lower margin than our organic traffic.

 

 

Mobile search is important

 

Mobile search is key to Yahoo!’s future. Search is half of our business. Users are more and more transitioning from desktop search to mobile search and we think it is fertile ground for innovation.

 

 

Premuim ads, native pricing, and video pricing drove revenue growth

 

So across more premium ads being sold, native pricing improving, and the enhancement of video pricing being added to the mix, that’s really what drove a lot of that 10%.

 

 

New NFL deal offers new opportunity

 

On the NFL, one, we’re so excited that they chose us. It’s such a new area for them. It’s a great area for us. The fandom of the NFL is just immense, and so we’ve been working very closely with them to understand how the experience should be presented, how we should make it available to our different users, where on our site we should make it available.

 

 

Smart and Final (SFS)

 

 

10% unit growth is the goal

 

In the Smart & Final banner, our goal is 10% unit growth each year. That equates to 20 new stores in 2015 and at the end of the second quarter, we’re right on that pace.

 

 

Extra! In favor of Legacy

 

We also plan to continue our steady pace of Legacy Smart & Final banner store to Extra! store conversions and opportunistic relocations. With more than 50% of the Smart & Final banner stores now in the Extra! format, the fraction of legacy stores will continue to drop each quarter.

 

 

Deflationary pressures larger than expected

 

Generally speaking, deflationary pressures were higher than expected in the second quarter, but it’s important to note that we’re seeing across the board deflation in every category. In fact, in the Smart & Final banner, we tracked 27 sub categories of sales and in the second quarter, we believe that only four of the 27 categories were deflationary, but three of these are key volume categories for us; Cheese, dairy and produce and deflation in the quarter had an overall negative impact on sales growth.

 

Expanding into delivery models

 

One other element in introducing Smart & Final to potential new customers is our test of delivery formats. We’ve pilots in limited geographic areas in both San Francisco and Los Angeles markets. With Google Express for same day and next day delivery and more recently with Instacart, an on-demand delivery model, while our experience is limited, we’re encouraged by the potential of both delivery models to better meet the needs of our customers as well as the potential to attract new customers both households and businesses.

Under Armour (UA)

 

Making strong moves into NBA market

 

To help drive this initiative we’ve recently brought on Terdema Ussery who for the past 18 years has served as President of the NBA’s Dallas Mavericks and has prior industry experience in athletic footwear and apparel. We can speak to this in more depth at our Investor Day meeting at September but we want to be clear today about our intent. This category focus will provide the structure to help us sell more shirts and shoes. This structure has proven successful for us in Golf with the combination of great product; a great asset and a great team helped us double revenues in the past two years.

 

 

Using Connected Fitness platform to expand customer base

 

We can do so because of the strength of our Connected Fitness platform, but we continue to add more than 100,000 unique registered users of a platform every single day. We remained in the early stages of incumbent potential of what the world’s largest digital health and fitness community with now over 140 million athletes can do to help us build consumer engagement and drive healthier lifestyles…Ultimately the more people exercise the more athletic footwear and apparel they will buy. Again we will provide deeper detail on our Connected Fitness opportunities in September at our Investor Day but we’re extremely pleased with the growth of our community and the type of insight we can bring to our consumers lives.

 

Brand imaging is about consistency and long-term commitment

 

And so brands are built on consistency, consistency is built in trust and trust is built in drops and is lost in buckets. And so what you see is we had a great big pouring I think of credibility in the sport of basketball and which Steph brings us on a day to day basis but that’s going to require a lot more investment and it’s going to require a long-term commitment. And so we want to let everybody know particularly our consumer but frankly our competition as well that we are moving in the basketball we’ve been working on this for it’s not an overnight success we’re working on this for years if not decade and we’re incredibly proud of where we’ve gotten to but we’re really just getting started.

 

 

Don’t want to expand through fanbases

 

So we’re now looking at, a) our profitability and it’s been one asset at the time and it’s been things from joining the EPL football with people in places like Tottenham Hotspur and then finding ways to make investments the recent announcement we had with Sao Paulo Football Club down in Brazil it’s not an immediate return for us. I’ve always said I don’t really see us as a licensed jersey manufacturer I don’t like that idea of growing sport by simply selling fan gear, we want to be on the authentic athlete we want to be on the pitch on the court on the field. But there is ways for us to get in and so finding the resource that we can spin off to make an investment in the market is very new for us like Brazil, its’ a big deal. And so we’re — I think we’re very patiently doing that around the globe where we’re finding assets that make sense and especially we can reinforce at markets that we can create an ROI that’s sooner than later.

 

Yahoo 1Q15 Earnings Call Notes

People, products, revenue, traffic

“For my update today we will use the framework of our virtuous cycle: people, products, traffic, and revenue. We believe with the right people you build great products that the market responds to through increased traffic and engagement leading to greater revenue. This is one of the key operating principles in our transformation and one reason we focus on hiring and retaining the right people and really improving the user experience and product features we offer.”

Employee count has come down over last two years

“Over the past two years, two and a half years, we have retooled our culture to be extremely performance oriented, concentrate our efforts in high productivity locations, closing 17 office locations in total, (4:14) approximately 80 products, reduced the number of contractors by nearly 2,000 and reduced our full-time employee count by nearly 3,000 people, including our recent reduction of about 1,100 full-time employees this past quarter.”

Tumblr approaching half a billion users

“The Tumblr audience is approaching the half-a-billion mark with an audience of more than 474 million monthly people, and we saw tremendous mobile engagement with users on the mobile app up more than 10% quarter-over-quarter.”

Steep declines in premium and programmatic PC advertising

“e continue to see steep year-over-year declines in premium and programmatic PC advertising. This has accelerated in Q4 and Q1, where we’ve seen more than $100 million of decline in each quarter. Our premium advertising declined 40% year-over-year, mostly due to a decline in sales booked directly to our properties. Audience declined 19% year-over-year due to lower prices paid per ad through programmatic pricing. We continue to do everything we can to stabilize and slow this decline, but new, more attractive formats like mobile, native and video are key to offsetting it.”

There are two types of search emerging

“there are two types of products that are emerging. The classic web search, call it deep reference web search which is classic Google search, Bing search, and there’s a new class of products that’s really arising with Cortana, Siri, Google Now. And those products are really heavily differentiated both from each other as well as from the historic legacy products”

An indispensible guide to digital info

“Our strategy is to be the indispensable guide to digital information, or at least one of the indispensable guides.”

Yahoo 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Recap of the alibaba terms

” In May 2012, prior to the current management’s arrival at Yahoo, myself included, Yahoo entered into an agreement with Alibaba regarding the sale of our shares. The May 2012 agreement specified a number of things including 1) the immediate sale of approximately 520 million shares of Alibaba at a $35 billion market valuation; 2) the sale of 262 million shares in the IPO; and 3) the lockup of those shares not sold in the IPO, approximately 262 million shares, for one year after the IPO.”

Current BABA stake is worth $34 B

“we continue to hold 384 million shares of Alibaba, valued at $34 billion on a pre-tax basis. These shares are subject to a one-year lockup agreement. ”

tumblr has grown a lot

” We acquired Tumblr a little more than 15 months ago. Over the past 15 months, they have seen strong growth. Their audience grew 40% from 300 million to more than 420 million users. The number of registered blogs nearly doubled from 105 million to 206 million. Mobile monthly users of their mobile app grew by 50%. And perhaps most impressively, Tumblr’s time spent grew from 22 minutes to 28 minutes on Tumblr dashboard sessions. The engagement numbers on Tumblr continue to be really impressive”

Accretive share repurchases

“From a capital allocation perspective, I want to call out that we have spent $1.6 billion on acquisitions, but we have returned more than $7.7 billion through share repurchases during that same time period. Underscoring the bulk of our capital allocation plan has been devoted to share repurchases and that these repurchases have been accomplished at very accretive prices.”

Revenue of 1B EBITDA of 300m

” GAAP revenue was $1.148 billion, and revenue ex-TAC was $1.094 billion, well above our guidance…Adjusted EBITDA was $306 million in the quarter, which was also above our guidance range as improved revenue performance flowed through and we managed costs ahead of our guidance. ”

A lot will change in search eventually

“On the mobile search front, we think it’s just a really ripe field for innovation. When you think about what will search look like on a phone or on a smaller device ten years from now, we think it looks pretty different than it looks today. We really like the Aviate technology that we acquired and we’ve been looking at how can we really enrich the experience such that it’s not a lot of different answers perfectly ranked, but actually the one answer you need when you’re on the go or you’re working in a more constrained screen environment.”

People spending a fair amount of time on tumblr, tumblr gaining share in blogs overall

“we’ve seen a lot of time spent growth in the logged-in users, which is the 22 minute to 28 minute metric that I provided during my comments. For people who are visiting blogs, that has remained relatively constant except for the fact that Tumblr is gaining share, we believe, in terms of blogs overall. So the time spent on non-logged-in users would roughly map to the market share they have been gaining overall in blogs.”

Yahoo 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Transformation is a long process

“What we know is this transformation is not a singular event. It is a series of events and quarters, some more challenging than others and some more successful than others and it will take time. In the case of Yahoo!, I have stated in the past that we believe a transformation of this size and scale will take multiple years and we continue to believe that is the case today. Even so given our top priority of long-term sustainable growth, we are not satisfied with our results this past quarter.”

Two issues led to weak revenue. Both were in display

“In Q2, we saw two key issues specific to our business both were in traditional PC display. While traditional PC display is an area that is in decline across the industry, the two issues we saw were unrelated to this trend.”

Delayed transition to yahoo ad manager plus

“The first issue concerned our delayed execution of our audience transition to Yahoo Ad Manager Plus. We took extra time to ensure the product was delivering for our advertisers. During that period buying, on Genome, our existing audience platform slowed and we were left with a revenue shortfall.

Fundamentally, Yahoo Ad Manager Plus is an important driver in growing our display business long-term, especially as programmatic buying continues to evolve and grow. ”

Shortfall in premium ad sales

“The second issue we saw in Q2 was the lower-than-expected contribution from premium advertising, resulting in an unfavorable mix shift. Premium exclusive high-quality content is best monetized through premium direct sales. Premium offers great opportunities to advertisers and it also captures more favorable pricing. As such, we recognized the premium as an important part of our business that merits investment, especially in content. This is why we have been investing in editorial to increase the quality of our media offering, improve engagement across our verticals and ensure we have premium inventory to attract advertiser demand. Across premium, we will also continue to experiment with new ad units, better targeting and tools to improve the performance and contribution from this segment.”

More user engagement

“In Q2 2012 our mobile user base was hovering just above the 200 million monthly active users. Today I am happy to report that Yahoo! saw 450 million monthly active users for the very first time in Q2 2014 representing more than 100% growth in just two years. In addition to driving user growth, mobile has also delivered step changes in engagement with the time spent on mobile growing 79% in the last year alone.”

Thanks to Jerry Yang and Jack Ma for Alibaba

“this is likely the last earnings call before the IPO. Take a moment and offer a word of thanks. Thanks to both our Founder, Jerry Yang who identified Alibaba as an investment opportunity and really championed it here at Yahoo! And I also want to thank Jack Ma and Joe Tsai for having us participate through the journey that has been Alibaba as shareholders. We really have appreciated our relationship with the company and the value that they have delivered to us and the relationship between the company continues to get better and better, which is one of the results of which is what you saw in the share sale reduction that you saw today”

Advertisers want to advertise on beautiful products

” in small groups I met with about 500 different people representing about 350 different brands. And it’s been a bit of listening, it’s been a bit of also talking about how our products are different both on the consumer side and on the advertiser side. And I think that what we have generally heard is one a lot of respect for how quickly we have moved the consumer perception the way our products, our advertisers always want to advertise on beautiful products. And the fact that we have done a lot to improve the usability, the beauty and the value proposition to our end users is something that they really respect.”

Ad manager modernizes the ad platform

“Yahoo! Ad Manager is something that is a big step forward in terms of modernizing our ad platform. Prior to this we didn’t have things like real-time bidding, we didn’t have cost per engagement, cost per install. We didn’t have the ability sometimes to seamlessly mix first party data and third party data into your buy creating custom segments more easily. All of these things are things that advertisers really want and so we have been focused on that is how we designed Yahoo! Ad Manager Plus to basically bring in these more modern aspects and ultimately make them available to the market.”

Yahoo 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Moved the core to stability

“We believe we’ve moved from our core business being in decline to a point of stable to modest growth. Well, we believe we still — we believe that this hyper growth we like to see will take multiple years.”

Seeing user growth

“great products have driven user growth. As I mentioned earlier today, we have surpassed 430 million monthly mobile users, which we really think is tremendous progress. Our growing traffic has attracted the attention of advertisers and we have seen significant growth in our mobile revenue as a result.”

Working on brand advertisers

“We have been really working on our relationships with advertisers as well as our offering for them and we’ve made good strides across the board particularly in consumer packaged goods. We’re continuing to meet with them and really cultivating the relationship. I think that when you look at — we’re certainly on the radar of all of the AdAge 100 most of them, the vast majority of them spend with Yahoo! and advertise on our sites.”

How to spend Alibaba proceeds

“On the question on the Alibaba proceeds, I would echo what Ken has talked about. We understand this is an issue of critical importance for the shareholders. We intend to be good stewards of our capital and we have been to date. When we look at the investments we need to make in the business, you’ll see the same type of mix we’ve been making to-date, some strategic acquisitions, some tuck-in acquisitions. And we really need to see what opportunities arise in terms of the ways we can deploy the cash at that time and we’ll do it in conjunction with our Board.”

Goal to grow off-network display business

“And so one of the reasons why for example, you will see, you’ve heard Ken referenced the fact that TAC is likely to increase in the future is because we think our Display TAC will go up as we take more of those ads and begin moving them off-network. We are obviously going to continue to place ads on our core Yahoo! Properties, but we also want to grow off-network business, which to date has been reasonably small on the Display side.”

When Momentum Stocks Break

Tesla is now down 38% from its peak and appears to be suffering the same fate as many other momentum stocks before it.  In order to help chart what $TSLA’s decline could look like, below is a list of the number of weeks that it took 11 other broken momentum stocks to lose 50% of their value from their peak.

It took these stocks 12 weeks on average to lose half of their value.  If Tesla matches that pace it could be below $100 by mid December.  On average, these stocks lost 91% of their value before their declines were over and the average duration of decline from peak to trough was 100 weeks (about 2 years).

Of course for every example here there is probably another example of a momentum stock that appeared to break but then recovered.  Chipotle and Monster Beverage are two that come to mind that came close to 50% declines before recovering.  Indeed, several of the stocks on this list (Netflix for example) have recovered quite a bit from their drawdowns.  In the end though, valuation always wins.

Related reading: Where do growth stocks peak?; Anatomy of a Short Squeeze

Broken Momentum Stocks

Yahoo 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Our current sprint is deeply focused on product quality and growing traffic and we’ve demonstrated great momentum on both this quarter.”

“Great teams build beautiful engaging products, those products drive increase traffic. The increase traffic generates greater advertiser interest, which ultimately results in revenue growth.”

“We’re committed to constantly innovating our products. We don’t always get them right the first time.”

“After years of global traffic decline in Yahoo, we managed to reverse this negative trend and U.S. 2013, we achieved year-over-year growth, effectively erasing the decline from the prior year. I regarded this as a very good sign.”

“n September, we announced that we have more than 800 million monthly unique users. This represents a 20% increase in monthly unique users over the past 15 months.”

“In Q3, we received more than 17,000 resumes in a single week. This is up from 12,000 in August, 10,000 in May and 2,000 in January, a more than 8x increase year-to-date.”

“Revenue ex-TAC for the quarter is roughly flat year over year. Growth in search and other revenue ex-TAC were once again highlights. Ex-TAC revenue from our display business was lower.”

” We’ve got work to do on delivering revenue growth, and translating the increased engagement to revenue.”

“Today, Yahoo! is the only place where advertisers can execute Display, Search, mobile, video and native campaigns, both through direct and programmatic means. This gives us a strong position in the market and we are investing so we can bring even more value to our clients and partners.”

“Well, the way we define native advertising is advertisements that match the content. They feel like they are part of the experience, they add to the overall experience. Search advertisement has been like this from the very beginning. And what we’re seeing is when you have native advertisements you can get much better performance. The challenges here is that these are our new formats so, we’ve been working with advertisers haven’t adopt these new formats like Yahoo! Stream ads, and over time we think that there is an opportunity to do more here.”

“I will anticipate that sometime within the next year we will begin to grow in line with the — with the traffic, the advertising revenue will start to follow that traffic trend.”

“On the pricing, there has been industry pressure across-the-board on price per click advertising. Part of this is because of the increased volume and part of this has to do with management of affiliate networks, the overall quality of traffic. And so, we have been working really hard to make sure that our affiliate network is incredibly high quality that’s come at the expenses some volume but overall we think it’s better for users. And so we’re very excited about the future.”