Aiera Investor Event Recap — Week of January 17, 2021
Notable tonal sentiment highlights from the week (with videos) as companies begin reporting Q4 2021 earnings. Plus, more notable textual commentary from the week’s earnings calls.
Notable Tonal Sentiment Highlights
Delta Airlines (Q4 2021 Earnings Call)
While commenting on Delta’s future plans for staffing during peak periods and the affects future waves of pandemics may have, CEO Ed Bastian scored positively on tonal sentiment. Included in his remarks were the company’s observation that despite infections rising as a result of Omicron, “travelers are still traveling.”
Ally Financial (Q4 2021 Earnings Call)
CEO Jeff Brown scored negatively on tonal sentiment despite neutral to positive text sentiment in response to a question about possible upside to the company’s guidance. In his answer, CEO Brown referenced seeing potential upside from used cars, while their guidance, as stated, considers the current trend of moderating used car prices and modest upticks in inventory.
Home BancShares (Q4 2021 Earnings Call)
CEO John Allison expressed neutral to negative tone against positive text sentiment while discussing the company’s plans for their excess liquidity.
Limelight Networks (Q4 2021 Earnings Call)
CEO Daniel Boncel expressed neutral to negative tone against positive text sentiment while discussing his conviction in the company’s core CDN growth guidance which implied sequential acceleration.
And now, more notable moments from the past week…
MSFT Announces Plan to Acquire ATVI in Quest for “River of Entertainment”
When I step back, it’s hard to overstate how competitive, dynamic and exciting the gaming industry is today. Gaming is the largest and fastest-growing category in entertainment. The last 2 years, in particular, have shown how critical games are to helping people maintain a sense of community and belonging even when they’re apart. Today, 3 billion consumers around the world play games, and we expect this number will reach 4.5 billion by 2030 as new generations turn to gaming for entertainment, community and a sense of achievement. We are seeing more players, more streamers, more titles and more new game publishers than ever before, but too much friction still exists today between content, consumption and commerce. We need to make it easier for people to connect and play great games wherever, whenever and however they want. Today, we face strong global competition from companies that generate more revenue from game distribution than we do from our share of game sales and subscriptions. We need more innovation and investment in content creation and fewer constraints on distribution. Our vision is for a river of entertainment, where the content and commerce flow freely, driving a renaissance across the entire industry to make games more inclusive and accessible to all. And together with Activision Blizzard, that’s what we will be able to deliver. Removing these barriers will only become more important as the digital and physical worlds come together and the metaverse platform develops.
- Satya Nadella, Chairman & CEO, Microsoft Corporation | Microsoft Corp to Acquire Activision Blizzard Inc Call, Jan 18th, 2022
NFLX Falls 20% After Softer Q1 Guidance Due to Softer New Customer Acquisition
No structural change in the business that we see. What’s reflected in the guidance, we guided to 2.5 million paid net adds in Q1. And what’s reflected there is pretty much the same trends we saw in Q4. So healthy retention with churn down. Healthy viewing and engagement, with viewing up. And acquisition just growing but a bit slower than pre-COVID levels, just hasn’t fully recovered. And we’re trying to pinpoint what that is. It’s tough to say exactly why our acquisition hasn’t kind of recovered to pre-COVID levels. It’s probably a bit of just overall COVID overhang that’s still happening after 2 years of a global pandemic that we’re still unfortunately not fully out of, some macroeconomic strain in some parts of the world, like Latin America, in particular. While we can’t pinpoint or point a straight line using when we look at the data on a competitive impact, there may be some kind of more on the marginal kind of side of our growth, some impact from competition. But which, again, we just don’t see it specifically. So overall, that’s what’s reflected in the guide. I’d say we — our big titles are also landing, at least our known big titles a little bit later in the quarter with Season 2 of Bridgerton in March, The Adam Project also in March. As you know, we also — while we are taking — changing prices in countries every quarter. In Q1 of this year, it happens to be our largest country, as we announced last week, actually our largest region with Canada as well. So that’s probably a little bit more impact than a typical quarter.
- Spencer Adam Neumann, CFO, Netflix, Inc. | Q4 2021 Netflix Inc Earnings Call, Jan 20th, 2022
GS-AWS Partnership Driving New Opportunities and Levels of Client Interaction
And we continue to find more ways to migrate certain platforms to the cloud, which gives us more efficiency and ability to connect with our clients and deliver resources to our clients. This partnership with AWS allows us to take our data sets inside Goldman Sachs. And if you think about SecDB and all the trading data sets and information that we have inside. In the old model, clients come to us, we use that data and we give them feedback so they can transact. In the new model, we’re allowing an ability for clients to connect directly into that so they can develop directly on that platform with our data sets, which will allow them to think differently about their execution decisions and priorities. There are different things that can happen from that. One, with certain very large clients. We’ve got direct feedback from those clients that can improve our wallet share because we’re delivering real value to them. And secondarily, we actually think there can be opportunities for people to pay for that as a service, given the size of our data set and the resources that we can deploy.
- David Michael Solomon, Chairman & CEO, The Goldman Sachs Group, Inc. | Q4 2021 Earnings Call, January 18th, 2021
Wage and Labor Cost Inflation A Growing Focus of CEOs This Earnings Season
I’d say…the component…that is most evident is that there is real wage inflation everywhere in the economy, everywhere. And if you talk to any CEO — and most CEOs obviously run different employee bases than we do, but still at Goldman Sachs, when you look at our 45,000 people around the world, the vast majority of those 45,000 people fall into what you call a more traditional corporate compensation model. And I think there definitely was — coming out of last year after we went through the compensation process, there were definitely places where , I think, with hindsight and with the constantly evolving environment of coveted supply changes, the monetary and fiscal policy environment, what they did to savings rates, et cetera, where there was a real base pressure on what I’d call base kind of compensation and wage levels. And so that’s a component of it, for sure.
- David Michael Solomon, Chairman & CEO, The Goldman Sachs Group, Inc. | Q4 2021 Goldman Sachs Group Inc Earnings Call, Jan 18th, 2022
Scott, so comp per employee, you’re right. It was elevated here in the fourth quarter, and that was one of the big factors there obviously was the incentive comp piece. So that should normalize as we get into 2022. I think if you look at it, excluding that for the back half of this year, that’s probably a good baseline to build off of. We’re going to have some higher labor inflation, which includes health costs as well as payroll tax and railroad unemployment.
- Sean R. Pelkey, VP & Acting CFO, CSX Corporation | Q4 2021 CSX Corp Earnings Call, Jan 20th, 2022
We’re seeing labor accelerate faster than what we have in previous years. So you have to bake that into the price increase. And our expectation is we will start seeing margins recover, but we’ll get into that more on the 27th call.
- Allen J. Mistysyn, Senior VP of Finance & CFO, The Sherwin-Williams Company | Preliminary Q4 2021 Sherwin-Williams Co Earnings Call, Jan 14th, 2022
If we look at wage inflation, it hasn’t changed much versus earlier in the year. If I look at our full-timers, we’re probably sort of in the mid-single-digit type range, maybe a touch below 5% in terms of what our base paper ahead is looking like on full-timers. If we look at the part timers that’s still up double digits in terms of growth. So we are seeing some wage increases. However, they’ve been relatively stable in terms of order of magnitude over the course of the year.
- Holden Lewis, Executive VP & CFO, Fastenal Company | Q4 2021 Fastenal Co Earnings Call, Jan 19th, 2022
[W]e are forecasting low single-digit expense growth for 2022. I do think that if the inflationary trends continue, that would actually be challenging to maintain. We probably see something a tad higher, but we’ll see where wage inflation goes and competition for employees. And one of the things that allows us to keep to the low single digits next year, not just for expenses, but for salaries and benefits, too, is the fact that we are resetting performance comp. So we would probably be a tad higher than low single digits, if not for setting the performance comp and where things go beyond 2022 and it is going to depend in large part where wage inflation and competition for talent goes.
- James J. Herzog, CFO & Executive VP, Comerica Incorporated | Q4 2021 Comerica Inc Earnings Call, Jan 19th, 2022
Employers Leveraging Retention Bonuses to Manage Attrition
Cost per employee increased 4% as a result of wage inflation as well as higher recrew overtime and borrow-out costs partially offset by last year’s $37 million employee COVID bonus.
- Jennifer L. Hamann, Executive VP & CFO, Union Pacific Corporation | Q4 2021 Union Pacific Corp Earnings Call, Jan 20th, 2022
And then to your main point of the question when it comes to inflation, wages, we have a stronger merit pool this year, and we have the special equity grant that we mentioned earlier to help improve retention but that comes at a cost, and that is baked into our guide.
- James C. Leonard, Executive VP & CFO, Fifth Third Bancorp | Q4 2021 Fifth Third Bancorp Earnings Call, Jan 20th, 2022
Additionally, our first quarter expense outlook is impacted by a broader and larger special equity grant for eligible employees to reward the record performance in 2021 and to provide a retention incentive over the next several years in this competitive labor market.
- James C. Leonard, Executive VP & CFO, Fifth Third Bancorp | Q4 2021 Fifth Third Bancorp Earnings Call, Jan 20th, 2022
Banks Express Comfort, Optimism for More Hawkish Interest Rate Environment
While I expect we will begin to deploy some of the liquidity in the first part of ’22 at somewhat higher rates than we saw in the fourth quarter, we remain cautious about locking in low long-term yields and remain very well positioned for rates at higher levels. On that topic, anticipating a question or 2 about rising rates, we reported for several quarters that we have focused on remaining interest rate sensitive, expecting the possibility of higher rates.
- Timothy S. Crane, President, Wintrust Financial Corporation | Q4 2021 Wintrust Financial Corp Earnings Call, Jan 20th, 2022
And while we will look to neutralize our asymmetric interest rate exposure over time, we are pleased with current positioning. Rob and I both discussed our noninterest income performance at length, but I would like to take a moment to note that the full year revenue growth guidance we provided on September 1 did not reflect today’s more hawkish rate environment. Were we to see rate increases consistent with today’s market expectations in 2022, we may see revenue growth above the communicated low- to mid-single-digit target.
- Matt Scurlock, Executive VP & CFO, Q4 2021 Texas Capital Bancshares Inc | Q4 2021 Earnings Call, Jan 20th, 2022
The top line of the revenue is, as you know, so much impacted by the — not just interest rate environment, but really the shape of the yield curve and the steepness of it. So, if we get help from the yield curve, yes, it will enhance. If it flattens or inverts, we’re not — we keep reading the same things that you do about what the Fed is going to do this year. That will unfold as we get into the latter part of this year.
But it is true, Frank, you’re willing to say, as long as the yields in the long bonds, move up that is definitely a plus. Steepness of the curve and that effect will definitely help us, yes.
- Vernon W. Hill / Frank Cavallaro, CEO & Chairman / Executive VP & CFO, Republic First Bancorp, Inc. | Q4 2021 Republic First Bancorp Inc Earnings Call, Jan 20th, 2022
We continue to expect net interest income to trough in the first quarter of the year and grow from there. That should result in a net interest margin, little change from full year 2021 in the area of 2.75%. Our forecast incorporates 3 increases in short-term interest rates, although the third increase occurs late enough in the year, to not have a meaningful impact on either net interest income or margin.
- Darren J. King, Executive VP & CFO, M&T Bank Corporation | Q4 2021 M&T Bank Corp Earnings Call, Jan 20th, 2022
We entered 2022 with the highest level of commercial loan commitments in our history, so further increases in utilization rates will be another potential catalyst. Our balance sheet is positioned to benefit from rising interest rates. As we have demonstrated in the past, we were able to execute in any interest rate environment regardless of the shape of the yield curve.
- Steven R. Gardner, Chairman, President & CEO, Pacific Premier Bancorp, Inc. | Q4 2021 Pacific Premier Bancorp Inc Earnings Call, Jan 20th, 2022
And we continue to provide our clients with the exceptional service and solution expertise they’ve come to expect. As we begin 2022, our focus is on balancing a variety of factors in the months ahead, with the prospect of higher interest rates benefiting our revenue, but conversely, the higher levels of inflation and the competitive labor market impacting expenses.
- Jason Jerrome Tyler, CFO, Northern Trust Corporation | Q4 2021 Northern Trust Corp Earnings Call, Jan 20th, 2022
MTB has built an asset sensitive balance sheet, which has proven to be “bulletproof” as we say over the past two decades in protecting against extreme, prolonged interest rate environments. Therefore, being extremely comfortable with our asset quality, a higher rate environment will benefit MTB’s already strong earnings franchise.
- Q4 2021 Metropolitan Bank Holding Corp Earnings Call, Jan 21st, 2022
Note: All excerpts, highlights, and insights in this email were generated entirely using the Aiera platform.
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