Akamai 3Q15 Earnings Call Notes

Akamai Technologies (AKAM) Frank Thomson Leighton on Q3 2015 Results

Slowing traffic growth in some of our largest accounts but rest of media business very healthy

“we are projecting some moderation in the growth of our U.S. media business, primarily due to slower traffic growth in a few of our largest accounts…To be clear, the rest of our global media business is very healthy. Our overall media traffic is still projected to grow at a substantial pace, and I am very optimistic about the future growth of our media business.”

We believe the slowing in traffic is overall slowing at these accounts, not do it yourself

“we are seeing a slowdown in those accounts off of very strong Q4 of last year, and it is magnified by the fact they do serve some of their own traffic. But we believe kind of the bigger slowdown in traffic here is that traffic overall is slowing, not so much an acceleration and kind of do-it-yourself.”

Bots have become a significant issue for customers

“Bot manager is our newest security service and is now in beta with 18 customers. Bots are automated software agents, and they have become a significant issue for our customers. On a typical day, Akamai sees over 10 billion requests from over 60 million bots. Some bots, such as search engine bots, are helpful, but many are harmful. Malicious bots can steal intellectual property and personal information, scrape prices, and consume significant bandwidth and server resources. Some of our customers have been surprised to learn that over half of their traffic is from bots.”

DIY doesn’t make sense for anyone except the giant media companies

“It’s not something that I think even makes any sense at all for somebody who is not a giant media company, just – it’s not going to be any kind of quality you’d want to have and it doesn’t even make sense financially, I think.”

It’s tough to say why traffic is slowing for our customers

“I mean, that’s tough to tell. I mean, this is the nature of our business that we can’t control how many people are doing a download, how many people are doing various things. So that’s really an end user thing. So why it’s slowing for our customers is difficult for us to assess.”

These are big, big customers

“these top three accounts in our media business represent a reasonably large percentage because these are big, big, big media companies. So the biggest share of the revenue deceleration and actually these three accounts are declining year-on-year.”

Growth outside these customers is strong

“it’s fair to say that growth outside of these three customers in the media is doing very well. Our international growth is strong in the media business, and is strong in other segments of our U.S. market as well.”

Apple 4Q15 Earnings Call Notes

Revenue grew by $51B y/y

“we are proud to report revenue of $234 billion, an increase of 28% and $51 billion over 2014. This is our largest absolute revenue growth ever. To put that into some context, our growth in one year was greater than the full year revenue of almost 90% of the companies in the Fortune 500.”

Sold 231m iPhones in LTM

“In the past 12 months around the world we’ve sold over 300 million devices including 231 million iPhones, 55 million iPads and 21 million Macs setting new unit records and increasing our global market share for both iPhone and Mac.”

Apps represent the future of TV

“Yesterday, we started taking orders for the all new Apple TV and it was a huge first day for this exciting new product. We want to provide the same innovation in the living room that we delivered in our iOS devices. People are already watching more TV through apps today and we think apps represent the future of TV.”

Issued 5.8B of debt denominated in other currencies

“In the September quarter, we issued a total of $5.8 billion of term debt, consisting of 1.25 billion British pound denominated notes, 2.25 billion Australian dollar denominated notes and 2 billion euro denominated notes.’

Expecting 700bps headwind from FX in Q1

“You have to consider the constant currency growth rates. And so if you do that, our guidance is actually 8% to 11% because we have about a 700 basis point FX headwind in Q1′

We’re seeing a lot of switchers from android

“We believe that iPhone will grow in Q1 and we base that on what we are seeing from a switcher point of view, we recorded the highest rate on record for Android switches last quarter at 30%.’

There are also still a lot of upgrades ahead

“We also look at the number of people that have upgraded, that were in the installed base prior to iPhone 6 and 6 Plus. And that number is in the low 30 percentages. ”

A huge growth in middle class in China

“The latest study I have seen from Mackenzie indicates if you look back five years China’s middle class had about 50 million people in it. If you look ahead five years, it will have ten times that number in it.”

These drivers are long term drivers

“the macro things that I spoke about earlier, the upgrade programs, the Android Switcher rate, the iPhone momentum in the emerging markets and the LTE penetration in these markets these trends are not one quarter things. These are longer term things.”

Are continuing to hedge as hedges roll off

“We continue to hedge, so our program continues on an ongoing basis and we will continue to provide some level of protection to foreign exchange movement. ”

I don’t envision having a large enterprise sales force

“I do not envision Apple’s having a large enterprise sales force will certainly make – we continue adding some people more on the engineering side, but I don’t envision having a large direct sales force.”

iPhone number one selling phone in ChinaIf I just look at how many people are coming into our stores, I wouldn’t know there’s any problem in China

” if I were to shut off my web and shut off the TV and just look how many customers are coming in our stores regardless to whether they’re buying, how many people are coming online, and in addition looking at our sales trend, I wouldn’t know if there was any economic issue at all in China. And so I don’t know how unusual we are with that…I just think that the area that it’s currently operating within, it’s hard to tell the difference of the consumer level for us. I mean, you really can’t tell the difference, if you look at sort of our daily and weekly numbers.”

I don’t think China is growing as fast as it was but our results are not dependent on changes in the growth

“I think that there’s a misunderstanding probably particularly in the Western world about China’s economy, which contributes to the confusion. That said, I don’t think it’s growing as fast as it was, but I also don’t think that Apple’s results are largely dependent on minor changes than growth. I think it’s much more of contributing – I think other things contribute to that much more.”

There are a lot of people who haven’t upgraded yet

‘When I look at the upgrade rate, Steve, what I see is I feel good that it’s a low number because that’s low number means that there is 69% of the people that are out there prior to the iPhone 6 and 6 plus that haven’t bother to upgrade this year. That’s a large number.”

50% of people buying the iPhone 6 in China are buying their first iPhone

“if you look at China as an example, it’s over 50% of people that bought 6 and 6 Plus were buying their first iPhone’

Twitter 3Q15 Earnings Call Notes

300m MAUs

“We continue to grow the number of people who use Twitter, now totaling 320 million monthly active and 307 million excluding SMS Fast Followers.”

Smaller nimbler teams

“As part of this focus we made a decision to reduce our workforce by about 8%. While this decision was difficult, we strongly believe we can move faster with this new org structure and smaller nimbler teams.”

Moments re-reverses the chronological timeline

“Moments represents a real fundamental shift in our thinking and the reason why is a lot of Twitter is organized by a reverse chronological timeline. We make people do a bunch of work to find the right accounts to follow and then they actually see the world through those accounts. What Moments does is you can open it up, you can actually see everything that’s happened in the world, that’s most meaningful, it’s organized by topics, so you see topics first. You tap in to each one of those Moments and you can actually see really unique insight and commentary on the particular event that you’re interested in.”

Need to roll out measurement tools for advertisers

“The biggest opportunity in the near-term I believe is on the measurement side. For five years we just haven’t had any third-party measurement and attribution. I talked a little bit about some of the reasons why. It was hard for or almost impossible for third-party measurement attribution systems to measure mobile in-app activity accurately and connected downstream to the conversion.”

Conversations with CMOs have never been stronger

“Our conversations with agencies and also with CMOs have never been stronger. They also look at us as a strategic partner and not just the media partner and that’s really important, whereas other people just come in and talk about ad inventory or their scale. We can come in and talk about that and certainly now showing an audience size both on Twitter and across the network of over 700 million people, but we also come with analytics and insights, things around customer service or comps and PR, all these things that feed into the marketing engines of each one of these companies.”

People tune into Twitter when they are watching TV and vice versa

“We’ve seen great traction in terms of historically when people are watching TV, they also are tuning into Twitter, sometimes exclusively into Twitter. When people are having a conversation about a TV program, it will increase the chance that people turn into linear television. ”

Make twitter easier for people to understand and to tweet

“what you’ll see from us is against two themes and this is going forward, which is really how do we make Twitter even easier to understand for more people, so that we continue to see more of that usage, people can bring it up and see everything that’s happening in the world immediately. But also how do we get more power to people who are using it to tweet. And that’s not just Twitter but also our properties like Vine and Periscope. How we giving creators more tools to be more creative and to express themselves in a different way”

Cummins 3Q15 Earnings Call Notes

Cummins’ (CMI) CEO Tom Linebarger on Q3 2015 Results

Worse than expected slowdown in Brazil and China

“Revenues and earnings in the third quarter declined from a year ago as a result of very weak demand in global off-highway and power generation markets and a continued slowdown in Brazil and China. Although we anticipate lower demand in these markets, orders have fallen further than expected, causing disappointing results for the company”

Reducing headcount

“we will reduce our professional headcount by approximately 2,000 people, with the majority of these reductions to be completed by the end of year.”

Competitors in the Euro are benefit from low Euro

“in the power gen segment we have now seen some pricing competition come in, primarily as a result of low Euro. So there is just a number of competitors in the European area that are Euro based costs and so areas where Eurozone exporters can compete with us, we are seeing some price competition in the gen set”

We had a slowdown in August, what was surprising is that continued into September

“We did start to see a bit of a slowdown in August, mainly in the components and engine segments. That’s not unusual. So having that slowdown in August is not the first time that’s happened. What was surprising and disappointing was the slowdown continued into September, again primarily in those two segments. ”

We thought emerging markets were starting to bottom, but they’ve weakened further

“we have set our plan not expecting a whole bunch of improvements in those markets, but they were starting to bottom, just as you suggest and if anything would be level or coming up. And in fact, what’s happened is they have gone down further. And that’s, I think, what maybe is the thing that says we haven’t clearly bottomed in most of those markets. We thought we had and we have not and where the bottom is, we are not exactly sure, but it doesn’t look like we have reached it. “

Anadarko 3Q15 Earnings Call Notes

Reduced per well costs at Wolfcamp by 4m per well and could cut another 2m

“At our Wolfcamp oil play, this year alone we’ve reduced our per well costs by $4 million, to $7.5 million, with direct line of sight to another $1.5 million to as much as $2 million per well in expected savings at a time we choose to pursue growth and migrate towards pad drilling across the field.”

Planning for the worst hoping for the best. Maybe a little more pessimistic than the forward curve

“we don’t have any better crystal ball than anybody else on what prices are going to be in 2016 and 2017. And our approach is plan for the worst and hope for the best. Consequently, we have a fairly low expectation, not much different than the forward curve, maybe even a little more pessimistic than that in terms of how we might plan for capital.”

Trying to decide how to allocate capital

“like all of our companies in our sector right now are trying to decide how we want to allocate capital next year, looking into very, at best, fuzzy picture of what that’s going to look like.”

There’s $100B in capital that’s been raised to invest in the sector

“I think, like most people, we still see this extraordinarily large amount of private equity that’s been raised. And most people seem to gravitate around $100 billion as the number that’s been raised and prepared to be committed to the sector over the next couple of years for investment if the right opportunities present themselves.”

We’re getting outbid by private equity backed teams in purchasing properties

“unlike the public markets, where you have a little bit different dynamic at work, where we see ourselves today trying to bid on properties in markets where we have interest, we are being pretty consistently outbid. And most oftentimes, we’re being outbid by private equity-backed management teams. And so I’m not sure I’d call that a seller’s market quite like I did previously, but I would say it’s a healthy bid-ask in terms of exactly what’s happening with properties when they come into the market and the receptivity they’re getting.”

There may be 95 management teams out there with PE backing

“there are a number of management teams, the number that I’ve heard most recently is maybe as many as 95 of them out there that have private equity backing, that haven’t deployed capital yet in the market. And the types of assets that we’ve been selling, both earlier this year, the three EOR, East Texas and CBM that we’ve announced, we’re in a size range that’s a sweet spot for those types of buyers.”

The buyside has rewarded capital efficiency

“My early read on, say, the first nine or so months of this year is we’ve seen the buy side reward capital efficiency probably better than they historically have…those companies that have good wellhead margins that are being able to improve those margins through the cost efficiencies, like we’ve been talking about this morning, that are on top of that good allocators of capital, I do believe in the I’ll call it the intermediate term that we probably will see the market, the buy side reward companies that can achieve that.”

Growth doesn’t maximize value

“Onshore in the U.S. everybody’s going to drill their Tier 1. They’re going to focus on producing that Tier 1 and then they’re going to redeploy the capital into their next best assets. And frankly that’s not the way to maximize, in our opinion, that’s not the way to maximize value unless your shareholders are really telling you that growth matters more than value and what we’ve heard and what we continue to believe in is that value preservation on the onshore and value building in the other parts of our portfolio to be positioned for a more constructive commodity price environment is the right way to approach it today.”

T Mobile 3Q15 Earnings Call Notes

More in common with tech companies

“We are a mobile internet company and we’d like to disrupt things. So I think we have a lot more in common with the tech companies of Silicon Valley that are traded here on the NASDAQ.”

$1.9B in adjusted EBITDA, 487m in adjusted free cash flow

“adjusted EBITDA came in at $1.9 billion, up 42% year-over-year. The adjusted EBITDA margin expanded from 24% in the third quarter of last year to 30% this year. I am particularly pleased that we generated meaningful positive free cash flow this quarter. Free cash flow was $411 million or $487 million adjusting…”

Upcoming broadcast auction will be transformational for our company

“the upcoming broadcast incentive auction this is going to be transformational for our company. We’ve talked about the benefits of low band spectrum. Customer retention, better in building penetration in the major geographical areas geographical expansion of the much more economical rate. And we are prepared to be as always disciplined but aggressive in the upcoming auction.”

We think we have plenty of buying power and don’t intend to access the equity markets

“Consistent with all of our prior disclosure sale, we believe that we have more than adequate cushion from a leverage ratio standpoint with no adverse consequence to our existing bondholders or corporate rating to fully fund whatever we need to do in the upcoming broadcast incentive auction. And we currently have no intend to access the market from in equity standpoint or any equity linked security.”

We’ve met with the rating agencies to confirm that

“So we’ve met with all the major rating agencies, have confirmed that position and I’m really pleased to announce that we just put on Bloomberg yesterday we’re kicking off a process to issue secured debt in T-Mobile US for the first time”

Sprint is doing a good job

“I would expect Sprint to post some positive phone results this quarter I think they’ve been doing a good job. But I’ll just point out that this was nine quarters in a row that the postpaid porting against Sprint is 2:1 or greater and that’s the trend right now.”

Deploying low band is a huge lift for the business

“the change in the network over the last 12 months to 18 months with the advent of low band and the pace at which we’ve been able to both clear and then deploy that spectrum is a huge, huge lift for the business.”

We’ve dobled our LTE footprint

“The cool piece for us is the geographic expansion. We’ve more than doubled our LTE footprint year-to-date by the end of the year we’ll have added a million square miles of LTE coverage across the US. So the pace and the reach of our LTE network John referenced fastest growing as well as the fastest it was pretty remarkable. And of course we’re doing it ourselves. We built this footprint as T-Mobile not true acquisition or a combination of rural carriers.”

The next 6-12 months will be fascinating from an industry structure standpoint

“This is one of several industry structure question that I find fascinating things that are going to make the next 6 to 12 months just a really fascinating time period”

There will be dark horses showing up to the auction. There aren’t going to just be 4 wireless carriers

“I do expect some dark horses to show up. And I think the dark horses showing up is nothing more than clarity for what we all are expecting is in industry that I’ve said many times that if the world believes that has all content will find its way to the internet and all internet will be viewed mobily. If we really believe that that structure will be managed by four wireless carriers vertically integrating and reverse and horizontally moving into the rest of these industry. It’s crazy.”

Verizon Go90 TV isn’t going to cut it

So you think about what Verizon just did with Go90 launching a curated video service that nobody asked for coming out in week one number 220 app in the Apple Store and then shrinking after four weeks to 1,065 that’s clearly not going to fly and it’s not going to be their bridge to profitability in 2017. ”

Comcast is dipping its toe in too

“And I think we saw Comcast discussed this morning tipping its toe in and using some optimality it may have to look at Wi-Fi on a MVNO basis and I think these are all just everybody looking at where they may go.”

Our strength is that we have the best brand right now

“The benefit that T-Mobile has right now is that we have the fastest growing brand and the fastest growing business with generating good cash flow we have a very strong business standalone but we are also a fascinating component in that continuum because we do control all the growth in the best brand in the mobile piece and as you look forward two to three years we will be far more thoughtful about how things move forward.”

People like Comcast probably want owner economics, not just MVNO

“It’s a tough model. There are owner economics and I certainly think that if anybody has significant scale they would want owner economics. I am pretty sure that in the long term strategy of a player like Comcast they didn’t have a strategic board meeting and say hey, let us be an MVNO they are thinking of what’s happening with their business and what’s the natural evolution and they have a put option on the table, they have an old historical agreement that probably neither them but Verizon thought about using, why not use it.”

Hard to imagine a future in which Comcast is an MVNO through verizon

“could you ever see a long term future where being an MVNO through Verizon is the strategy that Comcast will use for mobility without owner economic et cetera. I find that hard to believe”

Adding 1m square miles of coverage. There’s 3.2m square miles in the entire country

“we’re adding this year 1 million square miles of coverage. You think about that and this is a country with something like 3.2 million square miles in the entire country. ”

Praising Sprint for a second time

“I think we’ve caused a competition to invest in your network and get speed and let’s this maybe the second time this call and history may be made that I give Sprint credit is the bottom of the pack is moving up.”

Everyone is investing except for Dish

“all wireless carriers are investing heavily in their networks that is except by the way for their big wireless holder spectrum dish who has been given a lot of waver by the FCC on utilization of some of the spectrum for satellite so there could be used to create a competitive environment in the U.S. and so far it has put to work exactly no amount of that spectrum”

JS Earnings Call Notes 10.27.2015 – Roper, Comcast, IAC, Dupont, Waste Management, WR Berkley

Roper (ROP) CEO Brian Jellison said it may not look like it from the outside but under the surface, the company is moving very quickly

“if you look at the income statement, we are sort of laughing, because it’s the old story about the ducks on the pond and they are moving along nicely, but underneath, these are moving wildly.”

Roper (ROP) CEO Brian Jellison reminded investors of the company’s emphasis on cash flow

“The compounding of cash flow, if there is any theme around here, it would be that. We are in base, a compounder.”

Seeing strength in nuclear test business after several years of lackluster revenue in the segment

We had strong growth in our nuclear test business on improving market conditions. There is a good deal of activity that’s emerging, both in China and Korea based opportunity in the Middle East, and startups again in Japan for their nuclear activity. So that’s going to be a material improvement for us in the fourth quarter, and into 2016.“   

Roper (ROP) CEO Brian Jellison is excited about their acquisition of a software company called Aderant

Aderant has a really end-to-end platform of mission critical software, that primarily goes to law firms now, but could be expanded to other professional services organizations.  It has 3,000 of the world’s largest law firms and professional services organizations, and they really do a full suite of activity, all the way from time capturing and billing to docketing.  If you look at our acquisition criteria on the right, you will see it has got an excellent management team. In fact, we are retaining everyone.  Over 95% customer retention, strong cash flow characteristics, asset life, well once again, negative working capital, so people pay us in advance for work that we are going to eventually perform.”

Roper (ROP) CEO Brian Jellison said they are seeing heavy competition from Private Equity firms for deal flow 

There has been a lot of stuff for sale, but there is always a lot of stuff in the pipeline.  People are going to start to worry about their exit multiples versus what their entrance multiples order. So I think everybody is wondering about what their exit time ought to be, if it should be moved up. But boy, the guys that we work with and talk to all the time, I mean, they are still deploying capital like crazy.  So you see them making big bets with very high trailing multiples at least, for what they hope will be able to grow into.”

 

 

 

 

Comcast (CMCSA) CEO Brian Roberts said the movie segment of the media conglomerate had an excellent quarter  

At film, the third quarter was remarkable in many ways and continued the terrific run we’ve had this year. Minions and Jurassic world sustained our box office streak into the third quarter.  On August 5, we surpassed the prior record for the highest grossing year ever for a movie studio in worldwide box office. And this is the first time any studio has had three films crossed the $1 billion mark and theatrical receipts in the same year.”

Comcast (CMCSA) CFO Michael Cavanagh said the company is experimenting with cable & internet packages at different price points

A final comment on video, we are responding to different customer preferences, segmenting the market effectively with a variety of video packages and offers, like our Internet Plus offering to appeal to customers that might otherwise choose to purchase only broadband from us. Providing the right introduction to our products allows us to better retain our customers and potentially migrate them to higher end packages over time, improving our customer lifetime value.”

As you might expect in an era of emphasis on the digital age, broadband internet customer acquisition was strong

“The strong momentum in our high-speed data business continued. Revenue increased 10.2% during the quarter, making it again the leading contributor to overall cable revenue growth, driven by impressive growth in our customer base, as well as rate adjustments, and an increasing number of customers taking higher-speed services. We added a combined 320,000 data customers during the quarter with 73% of our customers now receiving speeds of 50 megabits per second or greater.”

Their venture capital arm has made investments in next generation content platforms

As we talked about the millennials, we talk also about NBC and investments in Vox and BuzzFeed and the ability to now hopefully have advertising that can take some of our content and their content and bring it to advertisers.”

 

 

 

 

IAC (IACI) CEO Joey Levin said ad blockers aren’t affecting the companies advertising business as much as many had feared

“On mobile it has been negligible. I think, we would see less than 1%-type impact. On desktop, we see an impact maybe measuring something in the teens, not accelerating, but the probably somewhere in the teens impact.  I think, we under indexed towards relative to the general internet on ad blocking. I think partially, because we drive lot of traffic through advertising. By definition if we acquire the user through an app, then they are going to see an ad when they get to our site, also because just our demographic is less likely to be adopting ad blockers.  The industry has to pay a lot of attention to and the solution is going to be adjustments in ads, better ads.”

And their video site, Vimeo, continues to gain subscribers

On Vimeo, the business today is substantially weighted toward subscription, but VOD business is growing much faster and growing very nicely. It is still small, but it is growing very nicely. If I look at many years, I see VOD being a, whether it is transactional VOD or subscription VOD, I see VOD being a huge portion of that business if we are doing things right over time. It is just a massive market and I think given our structure we ought to be able to take a piece of that.”

With the upcoming IPO of subsidiary Match.com, CEO Joey Levin explained the company’s stance on spinning off companies

Most companies, when they have a business like Match.com, and or businesses like we have had in the past which are leaders and their categories and doing very well, they hold on to those businesses. Our philosophy is when you get those businesses and when they reach that level of scale and when they have that sort of independence that we give them their own currency and set them up on their own and because we think that generally best for shareholders.”

 

 

 

 

 

 

New Dupont (DD) CEO Ed Breen, who broke up Tyco last decade, comes to Dupont with a mindset to improve the company’s focus and returns while potentially reducing capital expenditures

“I think we can have a better rigor around our return metrics across all of our products and platforms and programs that we’re working on. So we’re clearly on instituting that. So I don’t just highlight that to R&D. I think that’s across the board on how we spend on CapEx and certainly R&D is a big piece of that, but it’s across the board. I think more rigor around R&D is needed. Having said that, R&D is one of the great strength this company, but more rigor around that and that process I think could be very helpful for us and we’re starting to put some more of that in place.”

And he’s predicting consolidation in the sector

“Having said that, I’m not naive about what’s going on in the ag space right now. I do think at some point there’s consolidation here that will occur. You saw some other announcements just this week from others. And so we need to be very cognizant of that.  I am personally talking to the CEOs of some of the other companies. Something will give here on the ag side and I would say just looking at it consolidation should happen.”

New Dupont (DD) CEO Ed Breen cited some key characteristics as to what sets the company apart

here are so many great things here and I told the employees that were really working off a very solid foundation. First of all I’ve been in many companies and the one thing I can say is the employees are really dedicated. As I said in my prepared comments, they want to win. So there is a great spirit here and a great drive and you can’t make up for that.  Obviously this is a great science and R&D company and a lot of great things come through that. And this company is also very focused on its customers with an extensive global sales force that really is very impressive. So that’s a great foundation to have. The areas where I think there’s improvement needed are more operational. At this point time anyway especially with the environment we’re in, I think there’s a nice opportunity on the cost side.”

And he wants to make the company significantly more competitive and agile by reducing costs

also think from a CapEx standpoint we’ve been spending around $1.5 billion a year. I think that number is too high. We’ve pretty much zeroed in on what our numbers going to be for 2016.  that gets back to a rigor around returns on invested capital and what programs really makes sense which ones are marginal. And we’re going to do a lot that have great returns with them. And I’d say the other area where there’s improvement needed is working capital.”

 

 

 

 

Waste Management (WM) CEO David Steiner likened the switching dynamics in the waste disposal industry to the cable industry

And so, I always liken it to the cable companies. We all get a flyer every week that offers us lower price for cable. There’s probably a lot of people that accept that and say, let’s take it every time we can get it. But 90% of the folks say, you know what, the cost of changing out is too high, so I’ll accept the fact that this price might be a little bit higher, but I’ll accept it because the pain of switching is too high, until the cable starts going out or the satellite dish starts going out. And then all of a sudden, that price offer looks pretty attractive.”

And they put computers on each of their trucks which will help improve efficiency and route optimization

“over the last few years, we put on-board computers in all of these trucks. And I would tell you, we’re only kind of at halftime with respect to using the onboard computer to its fullest capability. For example, we can route our trucks dynamically. But that doesn’t do any good unless the driver follows the route that the computer generates, and we’re only following that route – if you think about best-in-class, a FedEx or a UPS probably follows the route 95% or 97% of the time. We’re kind of about 80% of the time. So, while that may seem like, pretty good, and it is okay, that last 15 to 20 percentage points is worth a lot of money.”

Waste Management (WM) CEO David Steiner said they are open to an energy waste deal if the prices is right even though they aren’t currently actively looking for a deal in the space 

On the energy services side, I’d tell you that if we were to do a deal in energy services, we’d do an opportunistic deal. We are not actively looking to go out and expand our footprint dramatically in the energy services businesses like we have been in the past. But if we can find some deals that are opportunistic and at the right price, we certainly think that long-term, energy services is going to be a good line of business. It’s not going to be a good line of business for the next year or two. So we’ve got to see something on the long-term horizon at an opportunistic price, if we’re going to invest in energy services.”

They have had to give price concessions to some of their customers in the energy space

Yeah. I mean they’ve come back to us over the last, probably 12 months, and asked for the price concessions. In some cases we’ve made some price concessions, in some cases we haven’t. It’s as much of as anything a function of where our assets are relative to the drilling that’s taking place. But certainly there has been some real pressure in that business, and that’s why our revenue will be down probably 30% for the year.”

 

 

 

 

Incoming W.R. Berkley CEO (WRB) Robert Berkley described where they are finding attractive places to deploy capital and places they are staying away from 

“As far as the domestic insurance market goes, as we’ve said over the past couple of quarters, workers’ compensation, general liability and many of the professional lines remain very attractive and we think are sensible places to be deploying additional capital. On the other hand, aviation, much of the marine market, cat-exposed property as well as offshore energy are product lines that we are increasingly concerned about and do not see a lot of rational behavior in those parts of the market.”
And they’re finding more competition in their international markets 
“Moving onto the international market, it is a bit more competitive; no different that it’s been in the past few quarters. One of the things that we’ve seen over the past few years has been many organizations have been looking to increase their footprints in some of the international markets that we have been operating in have become more and more crowded.  And the international insurance markets tend to be a bit more dependent on the reinsurance markets and that is due to the fact that much of the international market uses much larger limits on a day to day basis than we typically see in the middle and small commercial market in this country.”
The reinsurance market is extremely competitive 
“On the topic of reinsurance, certainly again a topic we’ve discussed with you all in the past, the marketplace remains exceptionally competitive. Having said that, it would seem as though the pace of competition seems to be not moving or increasing as quickly as it has over the past several quarters. I don’t think that we’ve necessarily touched bottom, but it would seem as though we continue to get closer as again the pace of erosion is slowing.  we do believe that capacity is becoming more and more commodity with every passing day and ultimately it boils down to the expertise that you can bring from a value perspective to your clients and focusing on clients that actually do value expertise and don’t just deal with commodity.”
Lower interest rates on their bonds hurt their investment income
“Turning to investment income, our investment income was $133 million this quarter, compared with $179 million in the third quarter of 2014. Earnings from our core portfolio including arbitrage trading declined 8% to $110 million, due primarily to lower reinvestment rates available for maturing bonds. The average bond yield for the first nine months of 2015 was 3.3%, down 0.2% from 3.5% in 2014.”
They don’t focus on GAAP accounting results but rather risk adjusted returns 
“These are especially interesting times. We really do focus on risk adjusted return. It means, we do some things that some of our competitors don’t do. We don’t focus truly on accounting results, because we’re focused on creating shareholder value more than reported earnings per se. That means, we start businesses instead of buying them, because that’s a better economic return; it’s not a better accounting statement return.”

 

Peabody 3Q15 Earnings Call Notes

Peabody Energy (BTU) Glenn L. Kellow on Q3 2015 Results

Chinese steel exports have reached record levels

“China’s economy remains a key component for coal trends. Recent domestic steel consumption has declined due to oversupply in the property sector and has paved the way for a rise in steel exports, which reached record levels through September.”

Lower electricity consumption and strong hydroelectric generation have led to reduced thermal coal

“At the same time, lower electricity consumption and strong hydroelectric generation due to heavy rainfall have led to reduced Chinese seaborne thermal coal demand, which has more than offset a 70% year-to-date import gain in India.”

80% of seaborne met coal production is not covering cash costs

“we project met coal supply to fall below 300 million tons in 2015, primarily due to declining U.S. exports. And we expect additional curtailments going forward, as an estimated 80% of seaborne met coal production is not covering cash costs at current pricing.”

Capital spending by top coal producers is down 70%

“Peabody estimates that capital spending by top coal producers has declined some 70% from the historical highs we saw in 2012. We believe this limited capital investment is insufficient to sustain current production and coal prices will need to rise well above levels we see today to incentivize new investment. And over time, we expect a gradual reduction in supply as well as increased coal demand to lead to improved fundamentals.”

Despite challenges to regulations, utilities are making investment decisions that may diminish coal consumption anyways

“In regard to the U.S. regulatory environment, I would like to briefly touch on the EPA’s carbon rules. We have seen early opposition from Congress, legislatures, and other groups, and we expect the regulations to face significant judicial challenges. That’s particularly true in light of the Supreme Court’s MATS ruling in regard to EPA overreach and most recently the judicial stay of the waters of the United States. At the same time, it is imperative that courts provide clarity in swift fashion. Some utilities are already making investment decisions based on the current rules even though ultimate deadlines are still many years away. The current plan is poor policy and poor law. Even so, I would note that under the plan the EPA still expects coal to fuel 30% of U.S. electricity generation in 2025.”

Difficult if not unprecedented times for coal

“these are undoubtedly difficult, if not unprecedented, times for the coal sector”

TD Ameritrade FY4Q15 Earnings Call Notes

Our clients decreased equity exposure in September and are awaiting direction from markets

“So far in October, intraday volatility and the VIX have both come in and our clients have decreased their equity exposure in September per our investment movement index and are now expressing some caution as they await direction from the markets.”

Margin balances did come down

“margin balances, as you would expect in the sell-off the market did come down a little bit and so that’s built into our expectations for next year. Stock lending as you mentioned is quite situation-specific. We’ve seen some good activity early in October here but that’s something that we tend to be cautious in our outlook on since it’s very relate — the revenue in particular is very related to certain IPOs and other market events.”

Trading has become very news and event driven

“And I continue to say the Federal Reserve banks around the world in the developing — developed countries have put a lot of stimulus into the system. And we’re now at the point where even China or Europe announces similar stimulus and we have a robust trading day. And so it’s become very news and very event-driven.”

I think there’s going to be volatility as stimulus is unwound

“And I continue to believe that there is no way that the U.S. Federal Reserve unwinds some of what they’ve done with all the stimulus over seven years, almost now that basically when they start to unwind it is going to be volatile. I think that’s – I think most people would agree with that”

We’ve got an election next year

“We’ve an election going on next year. That will probably take a bigger impact later in the year than earlier in the year, but I think between an election year, Federal Reserve tempering, what’s going on in the Middle East, the Federal Reserve banks in other parts of the world”

Our clients continue to have an appetite for tech stocks

“I think in this earnings season you saw some surprises on the downside, some surprises on the upside. The tech stocks continue to do well and quite an appetite in our client base. So it definitely could go higher, but we grow our number of funded accounts.”

Margin lending fell but came back

“some of our bigger margin clients that regularly use it, who tend to be a little bit more stable. I also think you have to look at the fact that we had a correction; everything came in and then basically the market’s come back pretty much. And so, I think it definitely did come down but it started to come back a bit as the market started to recover and as people saw an opportunity.”

The US equity market is the tallest midget in the room

“I also think in today’s world, I continue to say basically, it’s not obvious where you put your money, if you had to pick from a risk/reward basis the U.S. equity market seems like the best – the tallest midget in the room, so to speak.”

RIA breakaway pipelines remain strong

“we continue to see very good trends on the breakaways. Our pipelines are good. So we haven’t seen signs of it abating…With respect to the competitive environment it’s getting more competitive. There’s no question people have noticed our success there. ”

We’re not seeing clients over-extend themselves in margin

“I’d say we’re not seeing clients overextend themselves in margin or come back a lot. I think that the margin balances as a percentage of client assets have been fairly steady over time.”

Corning 3Q15 Earnings Call Notes

Corning (GLW) Wendell P. Weeks on Q3 2015 Results

Results were hit by weakening global economy and softening in television and IT retail

“macroeconomic headwinds are affecting our performance in the near term. Our businesses were slowed by the weakening global economy, the unexpected devaluation of the Chinese currency, and the softening in the television and IT retail markets. ”

Weakening economies, particularly China. TV growth in China has slowed

“weakening economies, particularly in China, and the stronger dollar impacted our businesses. For example, TV demand is weaker. TV growth in China has slowed. TV demand in Europe, Latin America, and Middle East Africa is softer due to the effect of the stronger dollar on retail prices and continued economic uncertainty.’

IT and mobile demand is weaker…smartphone sales should be flat in China

“IT and mobile demand is weaker, driven by lack of replacement drivers, the strong dollar, and continued economic uncertainty. We expect the worldwide IT market to be down 10% this year and smartphone sales in China to be flat versus last year.”

China’s auto and heavy duty truck production has slowed

“China’s auto and heavy-duty truck production has slowed through the year. China’s auto production is now expected to be flat year-over-year, and heavy-duty truck production is down 34% year to date.”

Expect global headwinds to persist in 4Q

“We expect the global economic headwinds to persist in the fourth quarter and impact most of our businesses year-over-year.”

Expect glass prices not to decline though

“We do not expect our pricing to be significantly affected by the weaker than anticipated glass demand. Glass price declines have been below historic levels for the last 12 months. As we have previously explained, we expect this more favorable pricing environment to continue and maybe even improve for several reasons.”

Our competitors cannot remain profitable at lower prices, Yen has given customers benefit, and supply demand balanced

“the financial situation at our competitors indicate that they cannot continue historical price declines and remain profitable. Second, the significant weakening of the Japanese yen has in itself given our customers a significant economic benefit without any decline in the yen price of our glass. And third, as we said before, we believe that glass supply and demand will remain balanced throughout this recent weakening in panel demand.”

These numbers were worse than expected thanks to weak demand

“these numbers actually were a little bit worse than what we had expected. When we began the quarter, we thought volumes would be up sequentially, and they weren’t. Now some of that, of course, was the contract dispute that I talked about. But the rest of it was panel maker utilization went down a little bit more than we expected, and the reason it did was our expectations for the end market came down during the quarter. And those expectations came down as evidence came in that TV demand was going to be lower for the full year than we thought it was going to be, and that was also true from an IT demand standpoint”

It’s too early to say that 4k is going to drive replacement cycles, but we like the product

“It’s still too early to call the bend in the curve, right, where it’s going to drive replacement cycles. And we’ve got an awful lot of noise in the marketplace with the really strong dollar, sort of the economic headwinds. So the data just isn’t screaming at us yet that we’ve got that driving replacement cycle feature. But, gosh, you can’t help but look at these things technically and really like what you’re seeing.”

All I do is work with young people

“All I do is work with young people these days. So I normally feel old. But anyway, I digress.”

Sometimes we forget that different industries move at different speeds

“sometimes we forget that different industries move at different speeds. So not everything moves like tech, not everything moves like consumer electronics and mobile consumer electronics. Matter of fact, few things do. So for instance, it is frustrating how long it’s taking us to get widespread adoption of lightweight glazing in automotive. It’s a heck of a good idea, good for consumers, it’s good for the environment, it’s good for safety, it’s good for almost everything. But the industry, even when you’re a highly-valued supplier, as we are, it just takes time.”