Korn Ferry FY 1Q18 Earnings Call Notes

Gary Burnison

Definitely seen an uptick in industrial energy and manufacturing

“Now, look, if you go back a year ago, we have Brexit, right? So, when you go year-over-year, clearly there was a lot of malaise last summer. And quite frankly, even I was just there, they are actually still is in the UK, companies are still reluctant to invest there. But over the last several, I would not say it’s a burst, I mean, we have definitely seen an uptick in industrial around energy and manufacturing, but I wouldn’t say it makes any kind of outline trend in terms of the talent that we are bringing in, we are up big time in terms of consultant numbers and you know you could easily subscribe $1 million or $2 million per partner.”

If there isn’t legislative progress the conversations will be different

“There is still that feeling. You are coming off a period where many people took some time off, but I am still a believer in that. That if there is not let real legislative progress other than extending a debt limit by 3 months to give relief down to the people in Texas they needed, but if there is not real legislative progress the sense that I get is that it will be a different conversation.”

Manpower 4Q16 Earnings Call Notes

ManpowerGroup’s (MAN) CEO Jonas Prising on Q4 2016 Results

Slight improvement in Europe

“I would say this if you look at the economic growth outlook noise aside, I think many sources have cited a slight improvement in particular in Europe. The unemployment numbers for Europe came out earlier today and they show the lowest level of unemployment in Europe since 2009, but of course still significantly higher than what we have in many other markets. The EU unemployment came in the Euro area I should say came in at 9.6%. So down 90 basis points compared to year ago. So the labor markets are slowly healing. And I think that’s part of our cause for cautious optimism as we look ahead but as you said there is always political uncertainties I could derail it, but we remain with what we see and how the conversations are with the employers and for now those conversations are constructed.”

Mike Van Handel

France just out of the starting box from an economic standpoint

“But France has barely made out of the starting box as it relates to coming out over the recession both from an economic perspective as well as from a labor market perspective. So France is really on the spectrum very much in the early phases of economic recovery and we are hopeful that what we are seeing now is the start of that. We expect it to be similar in the sense that it’s slow growth and uneven also in France. But the work that France needs to do or the progress France needs to make to get back to where they were before the recession is still substantial.”

Robert Half 4Q16 Earnings Call Notes

Robert Half International’s (RHI) CEO Harold Messmer on Q4 2016 Results

Job market continues to tighten

“All indications are that the U.S. job market continues to tighten. Unemployment for college -degreed workers 25years and older is just 2.5% today. This is placing pressure on the labor supply, particularly at higher skill levels. And the number of temporary workers as a percentage of the overall U.S. workforce remains near an all time high, a sign employers are building flexible staffing options into their human resources plans with increasing frequency.”

Clients more optimistic but little sense of urgency

” As it relates to U.S. trends and toner business, on the one hand conversationally our people would tell you that client optimism, client sentiment has clearly and markedly improved. With that said when you look at their actual activity levels as we speak. There is a little sense of urgency, they are waiting for the perfect candidate, they take more time to that, more time to interview, it’s more a wait and see and show me as it relates to the more optimistic view that they have, as confirmed by the NFIB study that we cited, the University of Michigan Sentiment Index, the PMI services that came out today. So our clients clearly feel better, they are more optimistic but that’s in the future and they are waiting to see more activity in their business before their hiring activity reflects that.”

Orders are up but placements still sluggish

“Having said that, we would observe that our order levels have improved in the New Year, which would be expected following the holidays, which we have experienced again this year. So tone of business, the conversations are more upbeat, there is more optimism, but as far as actual hard making placements, getting starts on the temp side, it remains sluggish.”

Optimism will lead to hiring

“I think to some extent we are speculating, I’m personally not surprised that you haven’t seen a big pickup yet in terms of the NFIB report for example. Optimism has to precede hiring and if you looked at the fourth quarter through much of the quarter people seem to be in a very bad mood, negative about the election and so forth. At the end of the day our types of clients are the types that they want to, they are from [indiscernible], wait and see, show me and so forth. So I think that the good news is the optimism is up as they start seeing more activity and so forth among their own clients, I think their hiring levels will pick up they’ll move more rapidly our placement processes might get condensed. so if you want to be an optimist there is a lot to be optimistic about.”

Sysco 1Q17 Earnings Call Notes

Bill Delaney

The restaurant industry not currently experiencing the level of growth

However, the restaurant industry, which represents approximately 60% of the foodservice market, is not currently experiencing the level of growth we’ve seen in recent quarters. Restaurant traffic continues to show year-over-year declines and restaurant spend has decelerated as well. More specifically, recent data from both NPD and NavTrak show weakening overall sales trends. That said, we continue to execute our business plan and key initiatives very well. I’m pleased with our progress to date toward the achievement of our three-year financial goals, and I remain confident in our ability to accomplish our strategic objectives over the long-term.”

We’re seeing some slowness out there

“So if you go back to my comments, I mean basically we’re seeing some slowness out there – softening, I guess, is a better word – in terms of overall growth in the restaurant segment, and ours is off a little bit as well. So it just reinforces the importance of solidifying those customer relationships and getting penetration where there is that opportunity where customers are growing as well as continuing to stay really locked in on retaining our customers and identifying new opportunities as we go along, but I mean the 1.8% to 1.9% is largely the organic growth.”

Traffic has been down

“Well, I think the challenges are what I’d referenced. You’ve got several quarters in a row now where traffic is actually down, and while the spend is up, it’s not rising at the same rate it was rising. So there is clearly a softening out there. I mean whether it’s because of the election or relative pricing between grocery store and restaurants, I’ll let others kind of critique that. Look, I think there’s ebbs and flows in any cycles of economies, and I think we’re going through that right now”

Don’t see the deflation reversing

“So, I think right now they’re managing it pretty well and the deflation is helping them. At some point, I guess it could become more acute if we were to see the deflation reverse, but as I think as Joel pointed out, we don’t see that happening here, at least not in this calendar year.”

Avis 3Q16 Earnings Call Notes

Avis Budget Group (CAR) Q3 2016 Results
Larry D. De Shon

Demand was weaker than anticipated

“And while we achieved record results and grew total adjusted EBITDA by 9%, the challenge we face is that we had targeted and expected even better numbers. Demand was a little weaker than we had originally anticipated; particularly in our International segment, where security issues and concerns impacted the summer peak.”

Volumes softened significantly in Europe as the summer progressed

” International inbound volumes in Europe softened significantly as the summer progressed. Industry fleet levels turned out to be loose relative to demand in August and September, and pricing was negatively impacted. Whether this was due to security concerns, Brexit, the Olympics, the economy or some combination of these items, it’s hard to tell.”

David B. Wyshner

Used car prices have been stable even as new car sales have slowed

” Used car prices have been stable over the last two quarters, even as new car sales have slowed, and we currently anticipate the residual values will remain soft next year by historical standards.”

Saw strong demand in US markets

“We saw some very strong demand in some key markets like Denver, Salt Lake, Chicago, Southern California, Northern California, Boston, for example, New York. Those were markets over the summer that performed pretty well.”

Robert Half 3Q16 Earnings Call Notes

Robert Half International (RHI) CEO Harold Messmer on Q3 2016 Results

The election is definitely an elephant in the room

“Yes. I’d just add that I spend a lot of time talking to executives of other companies and many of our clients and the elephant in the room probably is the election. Nobody really knows exactly what the impact is. They just know it is much different. You couple that with anemic GDP growth this year, which has resulted in a tremendous cost consciousness on the part of many clients. It becomes very easy to drag your feet, drag out the hiring process, be very careful about expanding. I would like to think we’re going to see an improvement in the horizon here soon after the election. But only time will tell, we do not know for sure. We just know it’s a very unusual circumstance.”

Keith Waddell

Didn’t get the lift we usually do in September and Oct

“Now, on the pace of deceleration, I’d say that July, we actually ended July stronger than we began it, we were encouraged by that. August wasn’t bad. But then September, where we usually start getting a sequential lift in September, we didn’t see the lift we typically get, instead, it was sequentially about flat. And then again, traditionally we get even more lift yet again in October and we didn’t see that lift either. So it’s essentially sequential flattening starting in July, rather than the lift we typically see in September and early October.”

Clients clearly remain cautious with little sense of urgency

“The issue around clients taking more time, I mean, clearly they remain cautious with little sense of urgency. It’s in part due to macro uncertainty, impart due to election uncertainty. They cite budget pressures, they cite cost control measures. They therefore get even more selective, they only want your ideal candidates that in turn pressures candidate supply when they are only looking for the top tranche of the [indiscernible] you have. They spend more time vetting. They want to do more interviews.”

We have orders, but it just takes longer to get them started

“Its not that we have an absent of orders, its more that the orders that we do have, it just takes longer to get a start if we’re on the temp side or it’s longer to make a placement if we’re on the perm side. So frankly, markets it’s a continuation of what we’ve talked about for two or three quarters, notwithstanding the easier comps.”

While we are forecasting a downtrend, it’s not as abrupt as what we’ve seen in the early parts of past down cycles

“But one thing we did look at, we have not only bill rates, which by the way were up 3.5% this quarter year-over-year, which is down a bit – from I believe it was 4.8 last quarter. So we not only look at bill rate trends, but we also looked at ours bill trends. And while they’ve gone slightly negative and are projected to go slightly negative in the fourth quarter, if you look back at 2001 and if you look at back at 2008, they fell much more abruptly than what’s implied in what we forecast. So, if you just look back at Robert Half volume data, unit data, what we saw in the third quarter, what we’re forecasting to the fourth quarter would not be near as abrupt as what we’ve seen in the past in the early parts of a down cycle.”

There has not been the abrupt negative turn in volume

“Well, this has been a more sluggish recovery than what we’ve seen in the past. Some therefore surmise that if there is going to be a downturn, it will be less severe as well. But to the extent I compare this to 2001 and 2008 in the early periods of those downturns, it drops and drops fairly abruptly. And again, I’m talking hours billed, I’m trying to take rates out of the equation. We have not – nor are we projecting that kind of abrupt negative turn in our volumes.”

Our growth is now under the most pressure in tech

“Well, first of all on Robert Half Technology, let’s not forget the year ago comps, we grew 15%. So we do have tough comps, we’re comparing to in tech. That said, the general trends that I described also apply to tech and as respects to tech development which is where we had seen most of our growth, that’s now where our growth is most under pressure.”

Saw more softness in the accounting operations which would be consistent with softness in macro

“Well, I’d say Accountemps we saw more softness in the accounting operations positions and those are the ones that are typically more client demand sensitive, more client volume sensitive. So it’s consistent that if you were to see softness in accounting due to macro conditions you’d see it in accounting operations.”

We don’t usually track the external indexes on employment

“So, we never track that closely to the external index as you talked about. Traditionally they’ve been very commercial staffing, light industrial production staffing centric. So sometimes we’re better, sometimes we’re worse, but rarely do we take that much stock in those external indexes.”

Tough to say if the election is affecting anything

“It’s hard to parse uncertainty between how much of its macro, how much of its – my own client financials aren’t where I wanted them to be, and therefore I am more cost conscience versus the part that’s election. The election uncertainty certainly didn’t help. How much it impacted negatively, its hard to know. It’s certainly part of the discussions that have taken place with our staff and our clients. But precisely what its impact is, it’s hard to know, and I guess only time will tell. We look back to some prior election years and there was a little bit of impact in the quarter prior to the election. But quite frankly, I don’t think there has been any election like this election.”

Perm has performed poorly which isn’t surprising given GDP

“Well, given how anemic GDP growth has been, it doesn’t surprise us the way perm has performed. Perm is always more economically sensitive than is temp. We are seeing that as we speak. It was more impacted in the third quarter, albeit it was on tougher comps than temp. But I don’t believe that we’ve lost any meaningful share of placements to whether you want to call it technology platforms, other new competitor”

If we get 2% GDP we’d see that as an improvement

“Well, the trends would have to turn more negative. We’re talking about revenues being down 1% in our guidance. And you don’t take drastic headcount actions based on a 1% swing, frankly in either direction. So for us to get much more aggressive on the cost side, we would have to see much more negative trends than we’re seeing. And here again, if the world believes we’re going to get 2% plus GDP in 2017, we would see that as an improvement not a decline.”

Manpower 3Q16 Earnings Call Notes

ManpowerGroup’s (MAN) CEO Jonas Prising on Q3 2016 Results

Modestly improved growth rates in European businesses

“We have witnessed the continued slow growth environment with stable year-over-year growth trends during the quarter in many markets, such as the U.S. and France, with modestly improved growth rates in some of our European businesses. ”

Some uncertainty for UK, but not seen a significant impact on client behavior

“As discussed on the last quarter call, the UK Brexit decision has added some uncertainty, economic and employment growth prospects in the UK. And while this decision will play out over the next 2 years, it is safe to say that we have not yet seen a significant impact on UK growth or client behavior through the third quarter. Only time will tell what the effect will be for the UK as the final terms of the exit will not be known for number of years. ”

Saw Experis weaken slightly in teh US, but still reasonable demand

“So starting with Experis in the U.S., we saw the performance weakened slightly quarter-over-quarter, but we think that the overall demand in the U.S. is still reasonable, although we have seen it come down through the course of 2016. So we know that the Experis U.S. business still has some ground to make up to close the gap to market, but the market has also softened during the course of this year”

Slight acceleration in Northern Europe

“So in Northern Europe, there is some slight acceleration on an organic constant currency basis into the fourth quarter. It’s just you have this acquisition overlapping that makes it look like maybe the growth rate comes down, but in fact at the midpoint of our guidance, we are anticipating underlying growth to pickup [indiscernible].”

Accenture 4Q16 Earnings Call Notes

Accenture plc (ACN) CEO Pierre Nanterme on Q4 2016 Results

Example of digital project

“. In digital, we are working with many hotels, the European hospitality company to implement a digital transformation strategy to increase sales across all channels through data driven customer segmentation. In just one-year, direct sales were up of 27% and more than one million people have joined Meliá’s Rewards program.”

Example of cloud and security projects

“In cloud, we are helping Rio Tinto, a global mining company, transition its enterprise systems to the public cloud, including the world’s largest SAP production system migration to Microsoft Azure, delivering increased agility with an as-a-Service model.

And in security, our cyber experts are working with large U.S. based utility to define, develop and run a next-generation security operations center. We are developing a comprehensive strategy to assess risk, managed identity and enable alerts for cyber threats in real-time. ”

See strong demand for mission critical transformation programs

“We continued to see strong demand from our clients for large scale mission-critical transformation programs. The broad range of services we provide across our five businesses, together with our deep industry expertise, continues to differentiate Accenture and we remain the partner of choice for the world’s leading companies.”

Double digit growth in the US

“In North America, we delivered 11% growth in local currency, driven by the United States where we have now delivered double-digit growth of five of the last six years. In Europe, we grew even 11% in local currency, with double-digit growth in the UK, Italy, Switzerland, Spain and Germany, as well as high single-digit growth in France. And in growth markets, we grew revenue 8% in local currency, driven primarily by double-digit growth in Japan, as well as strong double-digit growth in China, India, South Africa and Mexico.”

David Rowland

Macro environment volatile but guidance assumes market growth

“Great, thank you. So, let me just take a minute and just frame how we see the environment and then how that relates to our guidance. I think, first of all, and I don’t think it’s a surprise to anyone on this call, in balance, we see the overall macro environment being more volatile, let’s say, at this time than where it was a year-ago entering fiscal 2016. So we’d see a higher level of volatility overall in the macro environment for the reasons that this group understands very well. Having said that, in that context, our guidance assumes that the market growth, and when I reference market growth, I’m talking about the basket of publicly traded companies. We expect for purposes of managing our business and the outlook that the market growth is going to be very similar in 2017 to what we saw in 2016. And in 2016, to be clear, we saw organic growth in the basket of publicly traded companies of about 2.5%.”

Financial services is a tech intensive sector

” I think, as we know, Financial Services is a very technology-intensive sector, especially if you’re thinking about banking and capital markets, specifically. Within that, I would say the three demand drivers continue to be significant investment in digitizing the customer channels, so what we refer to, the sector refers to as distribution and marketing. There are significant investments to digitize the channel as a way to drive growth in the bank.”

We don’t see anything that’s going to fundamentally change a 2.5% growth environment

“What’s driving that assumption is that we don’t see anything as we sit here today that would fundamentally change the dynamics that we see in the market, let’s say, as we look out over the next four quarters. We see more of the same. And what we see is an organic market that would continue to grow in that 2.5% range, which means that we are making our own market through our differentiation, the uniqueness of our strategy, leveraging the power of our investments to drive a level of organic growth that is meaningfully higher than that to take share. But we don’t see anything that would meaningfully change that underlying organic growth of about 2.5%. So in other words, we’re not speculating on – you pick your black swan of the day, we’re not speculating on some black swan event that would materially change the market. If that were to happen, all companies will be revisiting the impact of something like that, should it occur.”

Do see some decelerations in 2017

“In terms of the – again, I almost hate to use the word deceleration because in almost all cases, our growth ambitions for the vast majority of our verticals continue to be quite strong and well above the market, albeit at lower levels than, in many cases, the very, very strong double-digit growth we’ve had the last year, if not two years. And so deceleration, what I would say for many of our verticals, we’ve assumed lower but still strong growth is the way I would characterize it. Energy and chemicals and natural resources, we don’t see a catalyst for change. We think those industries are going to continue to be tougher, let’s say, continue to be tough as we go through the fiscal year. As I mentioned, we have seen some pressure in communications in Europe in particular. And although we are very pleased with our growth in Financial Services, in banking and capital markets specifically, I would say that is an industry that we are watching, through Richard Lumb’s leadership, we are watching very, very carefully and very closely.”

Paychex FY 1Q17 Earnings Call Notes

Paychex’s (PAYX) CEO Martin Mucci on Q1 2017 Results

#7 best company to sell for according to selling power magazine

“We’ve been named to Selling Power Magazine’s 2016 list of 50 best companies to sell for landing at number seven. This is the fourth consecutive year for Paychex has appeared on the list moving up from the number nine spot last year very proud to be in the top 10 of best companies to sell for.”

Price increases in the 2-4% range

“So payroll is different from HR services but both are in the same in the same range in the range of 2% to 4%. On HRS, we don’t uniformly apply price increases across all products. We really do that based on where we see the market. So – but our price increases are in the 2% to 4% range.”

The competitive environment is pretty much the same as it had been

“I feel the competitive environment is pretty much the same as that has been same number of competitors and I think if anything we are feeling stronger about where we are from a mid market product than we certainly did a year or two years ago with the complete bundle product that we offer and the addition that we’re constantly making almost quarterly to the HCM bundle we have for Flex.”

Don’t see any changes in the economy in general

” I think we are holding price pretty well particularly in that mid market and we are gaining more revenue per client based on the bundle. So we feel pretty good about it right now. I think the only thing that we see impacting that would be more of the economy in general and we don’t really see any major changes there other than that businesses are getting closer to full employment and we are seeing the checks per client slow, but we expect that frankly for the last couple of years as people came back from recession.”

Feel good about the middle market

“So we feel good about the mid market and we are fully staffed, in fact we’ve increased more reps there than any other division in the mid market because of the product investments we’ve made and the opportunity we have between service and product. So you’re pretty good about the mid market right now and the opportunity particularly for selling season.”

Always been known more as a service company

” we’ve always been very much known as a service company and our technology was really more internal that next external for the client facing in beginning about six years ago, we really ramped up the investment and technology. And I think the technology becomes part of the service story, clients want to do more themselves, they want to do it online, mobile, they want to do and how they want to do it when and where they want.”

Regulation has created opportunities

“there has been a steady flow based on current administration and probably won’t change much in the election which could have some impact, but minimum wage for example right now it’s extremely confusing for our clients minimum wage rules are different by state, the Feds talk about changing minimum wage they have for government, but some of those are in that tied into government, but states are different, cities are different and we really help a lot of our clients help – we help them through our payroll service only or our HR outsourcing to stay up with minimum wage changes because not only are they are not changing ones they are changing over period of years and you have to make sure that you stay current with those.

And there is a lot of work on identifying like who is a the kind of immigration type things, who is – you got to know your customer, you got to know your employees, you got to make sure you got all that well documented.

So the rules keep coming, I don’t think that helps necessarily the business environment in general because of over regulation, but it certainly gives Paychex a lot of opportunities to go and talk to clients about their payroll need and their HR outsourcing need, because small to midsized business is just can’t keep it up with all of these changes.

The other thing is that enforcement and the penalty have increased as states and federal governments have looked for revenue sources. So not only is there an issue about whether you are compliant, but if you are challenged on your compliance, we can provide a tremendous amount of help. If you get a penalty in payroll, if you get a penalty for a time issue – a time and attendance issue, we’re there to support you with expert documentation and background and relationships with federal state and local governments and that’s a big plus that we sell to clients, but they don’t realize sometimes until they are hit with an audit or enforcement penalty.”

Steelcase FY 2Q17 Earnings Call Notes

Steelcase’s (SCS) CEO James Keane on Q2 2017 Results

Stronger orders

“The good news for the Americas is that we had stronger orders in August and those have continued through the first three weeks of September. We are in the midst of annual dealer meetings and they have been quite enthusiastic about the new products we launched earlier this year. Orders for those products are gaining momentum and are doing better than we estimated. Dealers are also responding positively to the work we’ve done to address growing demand for informal spaces including better merchandising of our ancillary portfolio. At a broader level, our backlog of high confidence opportunities in the Americas has strengthened for the second half of the year. So, we’re expected to grow our topline third quarter.”

Not seeing anything that looks like a recession

“Yes, so, we’ve seen recessions before in our industry and they are characterized by significant and sustained drops in order patterns. And that’s not really what we’re seeing this time. And they are usually also characterized by economic news that’s somewhat profound. So, whether it was the banking crisis or it was the drop in the NASDAQ back in 2001, you can usually point to some external factor that’s profound and say there’s a connection there. Sometimes there’s a lag between when you see it and when we see our orders, but we’re not really seeing that kind of connection now.”

For the most part people see an economy stuck in neutral

“I was in Washington last week meeting with CEOs of a lot of our customers at a kind of a general CEO conference. And I had a lot of discussions about how people are seeing the economy. And the way I’d characterize it is that there’s a lot of uncertainty, but for the most part people see it as an economy that is stuck in neutral, just a very slow growth or no growth economy in the United States.”

It doesn’t feel like an economy that’s poised to grow quickly

“We all know what the Fed did this week. It is clear that they have an interest in raising interest rates, but decided not to again based on the economic news that they are seeing. So, I think everybody is looking at it the same way. It just doesn’t feel like it’s an economy that’s poised to grow quickly. But on the other hand there is not really anything that’s pushing it down. ”

David Sylvester

Performance in verticals

“From a vertical market perspective, some of the largest declines were in sectors that had strong double-digit percentage growth in the prior year; for example, federal government, financial services, technical professional and insurance services, or in sectors where you might expect a significant decline because of known headwinds like energy. But we also saw a significant decline in the information technology sector which was closer to flat in the second quarter of the prior year.”

Continue to closely monitor EMEA

“We continue to closely monitor the overall demand environment in EMEA as various headwinds continue to pressure consumer and business confidence raising concern that even a small shift in confidence could destabilize the already fragile environment.”

Notable decline in Germany

“Customer order backlog for EMEA ended the quarter down 7% compared to the prior year. The decline in orders during the current quarter was driven by continued weakness in the Middle East and Africa largely driven by low prices as well as the U.K. likely impacted by Brexit, but it’s also a market where we believe we should be doing better and have recently appointed new leadership. Germany also declined by a notable percentage compared to strength in the prior year. These declines were reduced by strong growth in Spain despite uncertainty related to recurring elections and France which is continuing to improve following the leadership changes we made a year ago.”

Larger project business has been coming back

“we’ve been talking about on the last several calls, more of the mid-sized projects or mid-size continuing orders has been okay or decent for the last three quarters. Larger project business has been an area of decline for us up until the most recent quarters. So, the current quarter that grew modestly versus a modest decline last year. And I think that’s linked to the improvement in the project pipeline that we started talking about in June.”