As shelter in place orders have taken hold across the United States, many brick and mortar retail locations have been shuttered for weeks. As these brands face prolonged closures, many have faced bankruptcy proceedings, with companies such as J Crew, JCPenney, and Neiman Marcus all filing for Chapter 11 this month alone.
Continue reading “The Real Estate Industry Prepares for Tenant Bankruptcies”
We’re halfway through Q2 and different regions of the world are lifting lockdown measures at different rates. With conference season now in full swing, companies are beginning to reveal the patterns they’re seeing in May data.
Is recovery imminent with reduced stay-at-home measures? And how are different industries being impacted as more of the world loosens restrictions? Learn more about how companies are describing trends they’re seeing in May below.
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Information Technology
Q1 2020 Xiaomi Corp Earnings Call – 5/20
For example, if you look at the number of daily smartphone activations each week, as of the third week of May, the activations in Europe had returned to over 90% of the daily average in January.
We plotted the weekly activation trends across all key international markets. And the third week of May in Europe, as previously mentioned, smartphone activations had returned to over 90% of the prepandemic level.
In Southeast Asia and the Middle East, smartphone activations have actually surpassed the prepandemic level.
Q1 2020 Wix.Com Ltd Earnings Call – 5/14
Answer – Avishai Abrahami: Well, as I said, for — currently, we don’t see anything decreasing. And in fact, we’re seeing some positive changes, even stronger. I think that most of the world is still in the same spot, right, because they’re in isolation so I wouldn’t expect to see any change. And I do believe that this change is probably going to take us much further in May.
Mastercard Inc – JPMorgan Technology, Media and Communications Conference – 5/14
And essentially, if you put it all together, every week in March was slower than the prior week. We entered April, therefore, at the bottom of that run of March. The first 2 weeks of April were like the last week of March, broadly. Okay. I do that at a very high level. The next 2 weeks of April were an improvement over the first 2 weeks. So the latter fortnight was better. And what you’re seeing is that improving trend has sustained itself through the first 2 weeks of May. Essentially the data that we put out there, it is true across the world. There seems to be a bigger bounce in the United States right now than there is in the rest of the world, and you can speculate why that is. And probably part of it is something to do with stimulus checks in addition to the beginnings of reopening. But essentially, that’s the way the numbers are looking for transactions.
Zynga Inc – JPMorgan Technology, Media and Communications Conference – 5/13
But as you move through April and into early May, we started to see a return from some of the brand advertising because one of the best ways to reach folks right now is through a game. And also, if you look at the degree of advertising inside gaming networks, you’re right, there are a lot of interactive products sold within other interactive products. It’s hard to pin a percentage on it right now, but we are seeing a good broad-based set of advertisers return to Words With Friends as an example.
Now one of the ways that the decline in advertising CPMs was offset was the gains in audience. If you’re playing 4 hours a day instead of 3 hours a day, you’re seeing more ad impressions, obviously. So some of that was a mitigating circumstance. And as we see the second half unfolding, advertising is still going to be a very good business for us. It’s tough to say whether it’s going to be slightly up, flat or down. But from a positioning standpoint, we like the trends that we’re seeing in late April and early May.
Fidelity National Information Services Inc – JPMorgan Technology, Media and Communications Conference – 5/13
Answer – Gary Adam Norcross: Yes. Well, look, it’s a — it’s probably too — it’s a little probably too early to predict what a recovery would look like and the timing of the recovery would look like. But what I would tell you is, certainly, what we’re seeing, obviously, just like a lot of people, very focused on the health and safety of our colleagues, very focused on our clients and very focused on the delivery, also — but also seeing trends of improvement, right? As we see shelter-in-place get lifted around the country, we’re seeing transaction volumes improve. We talked about this. I mean Woody even said, coming out of April is probably going to be our low-water mark, and I think that’s accurate. I mean you’ve seen that continue to progress in the back weeks of the month of April and continuing to improve through May. And given the fact of where things are going and as these shelter-in-place rules keep arising, I think you’ll continue to see positive trends from the economy and transaction growth coming through May and coming through June.
PayPal Holdings Inc – JPMorgan Technology, Media and Communications Conference – 5/12
Answer – John D. Rainey: Sure. Sure. So our guidance was for revenue growth of approximately 15%. And that was different than what we’ve normally done. We normally provide a range, but we really just trying to give it our best guess. And that assumption is that, as we go through the quarter, will decline from some of the trends we saw in April where we had 20% revenue growth, as shelter-in-place measures are relaxed and people are able to go back to some of the shared experiences or social experiences in store.
The EPS guidance that we provided was for 15% to 20%. And that range is partly dependent on our ability to invest in the quarter on things like QR code and how much we can do in the last 2 months that we have in the quarter.
It’s — I underscore, it’s exceedingly difficult to forecast right now because you’re actually having to make some assumption around what happens with coronavirus, the path of it, the duration of it. Does it rear its head after social distancing is relaxed? And so that’s a challenge. Certainly, if the trends in April continue — and the first part of May is encouraging, but if those trends continue, they never could be better than that. But it’s tough to say.
Industrials
Q1 2020 ZTO Express (Cayman) Inc Earnings Call – 5/21
Second question, in April and May, the increase in the e-commerce, the trend is very positive, up 23% and then 32% increase year-over-year. What we saw in May is also potentially going to be a faster growth than the previous couple of months. ZTO, consequently, would also achieve and follow such trend, if not exceeding it. Thank you for your question.
Johnson Controls International PLC – Wolfe Research Global Transportation Conference – 5/21
Answer – George R. Oliver: Yes. I’d start by saying that we plan conservatively. Clearly, visibility is somewhat limited, although getting better every day. As I mentioned in our earnings call, our orders in April were down roughly high teens, 20%. And then given limited access to some of our customers as far as the revenue turn, which we did expect to see in April, will be the toughest month within our field businesses.
So what I’d say is we started to see improvement as the month went on at the end of April, getting access to our customers’ facilities as they started to open up. And we’ve seen that trend continue here in May. I would go back to China where this all started. And what I would share with you there, although we began the recovery in March, as we look at April and May, we’re getting back to almost 90-plus percent within our — not only the customer activity, but also our ability to be able to operate our facilities. We have 2 of our major facilities there in China. And then our supply chain is operating now 90-plus percent.
So I would expect that as you go around the world and as this spread around the world, we’re going to start to see similar type activity. If you look at EMEALA, we are starting to see sites opening up as the lockdowns are lifted. As you look at the U.S., what I would say is that is — as we’re opening up and customers are coming back to work and sites are being opened, we are seeing improvement on a day-to-day basis.
What I would say, the hardest-hit area is in the Northeast, and that’s where we’ve seen the — it’s been the slowest recovery here as things are beginning to open up. But overall, I think that April will be the toughest month. Third quarter will be the toughest quarter. And then I think sequentially, we are going to start to see improvement as the months go on here through the second half.
XPO Logistics Inc – Wolfe Research Global Transportation & Industrials Conference – 5/20
Answer – Bradley S. Jacobs: Okay. Sure. First of all, thanks for the invitation. Love to be here. Appreciate it. The trends are pretty much the same, Scott. April was the bottom, assuming there’s no second wave. May is less bad than April was. Geographically, it’s the same. Asia is almost back to normal. In Europe, France has come back sharply, still not where it was, but it’s come back sharply off the bottom. Spain after that, U.K. after that. And then we’re — U.S. at the end there. U.S., you see some signs of some green shoots, but it’s not a real robust rebound, but it certainly stabilized and hasn’t gone to get any worse.
Stanley Black & Decker Inc – JPMorgan Homebuilding & Building Products Conference – 5/19
Answer – Donald Allan: Yes. So we definitely see that low double-digit trend continuing with POS and U.S. retail. And we now have 6 weeks of POS because we haven’t quite — we haven’t gotten last weeks yet. But we’ll get that today or tomorrow. But the trends continue to be in line with that.
Johnson Controls International PLC – Goldman Sachs Industrials & Materials Conference – 5/15
Answer – George R. Oliver: At this stage, I think Europe was shut down. The shutdown in Europe was much broader initially in April. That’s starting to come back, so we’re watching that closely. I would say in North America that we were deemed essential everywhere we do business, but depending on the shutdowns is what limited our ability to be able to perform the service. I’d say North America is a little bit better than what we saw in the month of April than we saw in Europe. And so I think as the lockdowns get lifted, as we get back to work and the access to these facilities become more accessible, then we’re going to see a similar trend, I believe, in Europe and North America.
3M Co – Goldman Sachs Industrials & Materials Conference – 5/14
Answer – Nicholas C. Gangestad: Yes. What we were seeing in Japan, our Transportation and Electronics business, we’re seeing noticeable declines there. We were also seeing declines in our Safety and Industrial business. In fact, we were — and Health Care, as elective procedures are being delayed or canceled in Japan as they are in much of the world. Those are all trends that we were seeing in Japan in April and continuing into May. So I wouldn’t say there’s anything in particular going on, any particular message there of something in Japan. I’d say it’s a reflection of what we’re seeing in much of the world.
Healthcare
Zimmer Biomet Holdings Inc – UBS Global Healthcare Conference – 5/19
We expect May to be at similar to April or better. And what we were trying to do with that comment was kind of say that April is the floor, we don’t expect it to get worse than April, right? So the deepest part of the trough we believe is behind us. And from there, we should see some improvement into May, trend into June and then, of course, into Q3 and Q4, provide some broad shaping. But at that point and at this point, that was the best that we could do because there’s still a lot of uncertainty. Now where we are through May, early part of May is the leading indicators we’re seeing continue to give us confidence that, that overall trajectory we provide is still very much intact, and we’re seeing a lot of really good positive proof points. We don’t want to overreact to 1 or 2 weeks because there still remains a lot of uncertainty, which I can go through. But we are seeing some pockets or some signals that we were — as leading indicators that we were hoping for. So let me go through those.
In China, we’re seeing a really rapid be here from a recovery standpoint. Within 2 months of the deepest trough to where we sort of exited May and kind of began — or sorry, exited April and began May, we went from doing about 25% of normal run rate to almost 75% or 80% of run rate. So pretty massive recovery in just the 2-month period. We’re continuing to see that positive trend through the early part of May.
Encompass Health Corp – UBS Global Healthcare Conference – 5/19
Answer – Mark J. Tarr: Yes. Good morning, and welcome, everyone. This is Mark. I’ll take a first shot at this. And yes, we filed the 8-K this morning that shows our volume trends in our operating segments. And I think if you had a chance to take a look at it, you’ve seen that where we certainly ended February strong, went into March strong. Second half of March started to decline. We saw a bottoming, the downward trend in both of our segments in April. And then we’ve had a nice trajectory coming back up through April and then so far into May. So we feel very positive about the way the trends are growing now and the fundamentals of our business going forward.
Straumann Holding AG Acts Rapidly to Align Costs with Lower Revenues Call – 5/14
Question – Michael Klaus Jungling: Okay. Great. And then please check up on a previous question I asked on the last earnings call. Is it still reasonable to assume that Straumann will have an EBITA profit in the first half? Is that still something that the organization feels comfortable with?
Answer – Peter Hackel: Peter speaking, Michael. Yes, I feel comfortable with that decision. Also, obviously, we don’t have visibility — full visibility on May and June yet, but I feel comfortable with that assumption. Yes.
Answer – Guillaume Daniellot: And what we can say with what we have seen with mid-May, yes, it has confirmed that trend.
Exact Sciences Corp – Bank of America Merrill Lynch Healthcare Conference – 5/13
When you look into April, that decline accelerated in the first 20 days or so of April. Year-over-year declines were 63%. And as Kevin said, things started to pick back up. And why this is so exciting is that our reps are out of the field. And for the most part, most physician office visits are not happening today. In the back 10 days of April, our Cologuard order volumes were improving, down just over 45% in the back 10 days. We’ve had positive trends in May and those continue up through today. In fact, if you look at last week in total, relative to the low week of April, our order volumes on the Cologuard side are up over 60%. And again, this is without our reps back in the field. So this is in part due to people starting to realize, look, we’ve got to move on here with our lives. Cancer doesn’t stop. It’s also in part due to the quick actions our team has taken such as staying up with a telehealth site that has helped us start to drive the business to a better spot. I think this is where the business has really transformed. And longer term, we’ll be better off for it.
Universal Health Services Inc – Bank of America Merrill Lynch Healthcare Conference – 5/12
Answer – Steve G. Filton: Yes. I mean so we’ve actually — in our 10-Q, we gave a little bit of that information on our earnings call. At the end of April, we gave, I think, in a little bit more detail in the 10-Q. I mean, I think roughly the trajectory in both businesses had been — we clearly saw this fairly dramatic decline in volumes in the last 2 weeks in March that continued into the early part of April. And then by mid-April, the end of April, both businesses started to stabilize and, in some cases, improve. I think on the acute care business, aided by the fact that at least in early May, some of that elective and surgical sort of procedures that have been delayed and deferred are coming back. That’s not so much of an impact on the behavioral business. But I think we’re seeing the behavioral business start to at least see a rebound trajectory. We’re certainly not back to normal, but we’re seeing that rebound trajectory.
HCA Healthcare Inc – Bank of America Merrill Lynch Healthcare Conference – 5/12
We’re seeing that and other statistics that we shared about as well. Recall we talked about inpatient surgeries were down about 50% in the first 2 weeks of April. In the last 2 weeks, they were down just a little more than 30%, and in the first week of May, down around 20%. So we’re — again, another indicator that we’re starting to see some of that volume come back. How quick, how long it lasts are clearly unknown.
Outpatient surgeries, if you recall, was an important statistic. In the first couple of weeks of April, we were down about 70% when you combine both our hospital-based and ambulatory surgery. We’ve started to see that come back. Our hospital-based outpatient surgeries were down about 50% the last couple of weeks of April, and we’re hovering on the hospital side just under 20% right now. Our ASD volumes are probably hovering around 40% to — 35% to 40% of their historical trend in early May. So we think what we had anticipated is that the recovery period or the restart period would begin towards the latter part of the quarter — is beginning to happen. We’re still early in that stage. So how quick and how much of that lost volume can be recaptured are still unknowns, but we think we’re starting to see at least some signs of that volume return to us.
Consumer Discretionary
Q1 2021 Best Buy Co Inc Earnings Call – 5/21
While we continue to see heightened demand for these products, we materially changed our operating model and therefore we began to experience overall revenue declines. As a result, in the first 3 weeks of the new model, from March 21 to April 11, revenue declined approximately 30% compared to last year. In the last 3 weeks of the quarter, from April 12 through May 2, sales trends improved as stimulus funding began to circulate. As a result, during that time period, revenue declined approximately 8% compared to last year.
Q1 2020 Lowe’s Companies Inc Earnings Call – 5/20
The strong broad-based trends that we saw in April have continued into May with strength across both DIY and Pro and across nearly all merchandising categories and all geographies. For May month-to-date, U.S. comp sales have been trending at or above April results with strong double-digit comps across all geographic regions. Gross margin was 33.1% of sales in the first quarter, an increase of 164 basis points compared to Q1 of LY. Gross margin rate improved 110 basis points driven both by the actions that we took last year to lower product cost and improve our pricing and promotional performance as well as a 40 basis point benefit from lower promotional activities throughout the quarter.
PulteGroup Inc – JPMorgan Homebuilding & Building Products Conference – 5/19
I would highlight the fact that we did put out a release on May 11, where we provided some additional commentary around our results in April as well as into the first week of May. And it was really encouraging. What we highlighted is that we had nearly a fourfold increase in sign-ups as we move from the end of March when the COVID-19 impact started to where we ended the first full week of May. And we were incredibly encouraged by not only what we were seeing on our digital platforms, but also what we were seeing in our sales offices with physical traffic as the majority of our sales offices have now resumed regular walk-in traffic in addition to appointments.
And then further, the update that I provide today, Mike, is that strength, we’ve seen continue all the way through May. So just as we saw week-over-week increases as we move through April, we’ve seen that trend continue into May. And so we’re quite encouraged by the resiliency of the economy and the resiliency of the homebuyer.
Q1 2020 Draftkings Inc Earnings Call – 5/15
Answer – Jason Robins: Yes, so I think really it has been a continuation of what we have been seeing in April. I think that there are some things that vary based on seasonality in sports, but iGaming is actually remarkably consistent throughout the year. So I think that really it has kind of been similar to what we’ve been seeing in April.
Communication Services
IQIYI Inc Earnings Call – 5/19
Answer – Dahlia Wei: [Interpreted] Eddie, thank you for your question. Yes, you are correct that entering into April and May, we have seen that the time spent for both free users and membership have been on a declining trend, although on average per capita level, the time spent doesn’t decline that much but total time spent is declining. Also for our membership, the retention rate has some impact as well. And as a result, the net number or the net adds number is — also have some negative impact. Thank you.
Q1 2020 Scout24 AG Earnings Call – 5/14
Answer – Dirk Schmelzer: Okay. Thanks very much, Miriam, and welcome back. First of all, with regards to the deferral in May, we see the same trends that we basically saw in April with around about a not material figure of our overall customer base of 10% to 15% making use of the deferral program. And we see that across the board. We see that on residential sale as well as on commercial.
And to your second question on the revenue impact. To be honest, we have been positively surprised by our ability to cope with the originally outlined revenue impact that we saw of between EUR 8 million and EUR 10 million. So in April, stand-alone, we only saw EUR 4 million flowing through, and that is due to a mix of effects. First of all, free listings. Although free for 30 days, still more than 15% of our customers made use of payment options in the free listing space. The second piece is we managed to compensate some of the lost revenues by what Tobi just mentioned with memberships on rent, which were existing already with potential people looking out for a new apartment. But what we also see now is memberships on the landlord side increasing. And with that, we were able to compensate for the revenue loss of free listings. And certainly, we also plan to continue with that into May because we see those figures accelerating and also playing into our strategy of delivering realtor leads to our customers. And the more listings we have on the platform, the more we are able to deliver realtor leads to our real estate customers.
Materials
Q1 2020 PETRONAS Chemicals Group Bhd Earnings Call – 5/20
Answer – Rashidah Binti Alias: Correct. I — Alex, so yes. Thank you, Datuk. Alex, so for April, we do see — in our observation, we do see that the market prices for April kind of like bottom, as you rightly pointed out, we see a heavy impact in April. I’m quite sure you’re very well aware as well. If you follow the market trend of the product prices. However, starting from May, we are seeing some recovery in terms of the prices. Cautious recovery though, but we do see some pickup in terms of the market price, starting from May, which is why I think we are hoping or rather, we are seeing that we have probably passed the point of the lowest point of COVID, provided there is no second wave, yes. So we have probably passed the worst point of COVID, and the market is demonstrating some recovery from May onwards. Volume is not affected. That’s what we’ll talk about it in your second question when he talks about contract cancellations. But so far, volume has not been a fact that very similar to quarter 1 with all the efforts that we have put in. So with that, I think when it comes to quarter 2, let’s see how it goes, but you can see that the market is lower compared to quarter 1. Like I said, volume is not affected.
Air Products and Chemicals Inc – Goldman Sachs Industrials & Materials Conference – 5/15
Answer – Seifollah Ghasemi: Sure. As we said, we usually don’t get into that detail in the middle of a quarter, but I understand these are different circumstances and the investors are very focused on that. So I’ll be happy to give you an update. On the 25th of April, we told people that the way we see things is that in — during the month of April, up to that time, our business in China was back to pre-crisis level and actually, with some of the products we are ahead of last year. That has — is still is the case. We see that in the month of May, China has gone back to normal. Our people are going to their offices. Our customers are taking the product. And still, as I said, they are back to normal levels and actually some products higher.
Dupont De Nemours Inc – Goldman Sachs Industrials & Materials Conference – 5/14
And then, interestingly, I don’t know the rest of the world as it comes back will be exactly like China, but China rolled back pretty nicely here. We were down in the first quarter in China organically about 1%, which I was actually pleasantly surprised by that. I thought the first quarter would be down a little bit more because of the shutdown for a few extra weeks that occurred there. But anyway, in aggregate, we ended up down 1%. And in the April, the month of April, on the core DuPont businesses, we were up kind of 6%, 7% organically. So we saw a really nice comeback there.
So kind of high level, that’s what we’re seeing. We expect those trends to continue through the month of May. June is still a little bit fuzzier. We don’t see the order book as clearly in some of our businesses. But again, I don’t think it would get any worse than kind of a 15% down range.
Utilities
Port of LA – Wolfe Research Global Transportation & Industrials Conference – Rail Shipper Panel – 5/20
Answer – Christopher Chase: Sure, sure. Yes, April turned out to be pretty good, but that was a little bit of false hope because that was really cargo bed had been pent-up because of the closures in Asia. We actually — year-over-year, April, in terms of import, loaded containers was a little bit higher than the year previous.
That being said, most other metrics were down significantly. And that, like I said, it was a little bit of false hope because we’re looking at probably somewhere north of 30% year-over-year decline for April. I’m sorry, for May.
Since January, healthcare companies have raced to provide support against COVID-19, noting that vaccines may be the best (and perhaps only) way of stopping the virus.
This week, American biotech company Moderna announced its first successful test of a novel coronavirus vaccine, causing its stock to soar. Meanwhile, healthcare giants Abbvie, Catalent, BioNTech, Pfizer, and Merck presented at the UBS Global Healthcare Conference, outlining their approaches to developing safe and effective coronavirus vaccines before the end of 2020.
Despite Moderna’s early successes, experts agree that it is essential to develop multiple vaccines, as the global need for billions of doses will far outpace the production capacity of any one manufacturer.
AlphaSense can track FDA drug approvals in real-time using smart search technology. You can also track management commentary in real-time across the entire market, by industry, or watchlist. We expect that the coronavirus vaccine will be an essential theme to follow throughout 2020 and into 2021. Start your free trial of AlphaSense now or login to your account.
Abbvie (UBS Global Healthcare Conference – 5/20)
Question – Navin Cyriac Jacob: Fully understand that this question maybe challenging to answer, given how early stage you are with this and how, on a relative basis, the understanding of the virus is extremely early in its existence. But is there — is the antiviral approach that we’ll be taking against SARS-CoV-2 will — do you think it will be a combination approach? I mean, so far, everything seems to be done on a monotherapy basis, perhaps combination, if you think about hydroxychloroquine plus ZITHROMAX. But typically, we see cocktails being created. And in HCV, we even had cocktails being created with multiple novel therapies that have not necessarily been approved. Is there a path for a novel cocktail of antiviral being pushed forward in development for SARS-CoV-2?
Answer – Michael E. Severino: Ultimately, I think combination therapy will be the answer to treatment of COVID infection. Obviously, vaccine development will also be important, but that’s a separate matter. If we talk about treatment of COVID infection — and I think there will be a need for both, a vaccine, certainly, but also the ability to treat patients who acquire disease either before a vaccine is developed or in the period between when a vaccine is first available and when we have wide-scale immunity across the population. There’s going to be a period there where antiviral therapy is going to be very, very important. And I do think combinations will ultimately be the way to go. I think in the initial studies, what you saw is monotherapy for the reason that I mentioned earlier, which is that we are primarily dealing at this stage with repurposed therapies that have unclear activity, and there was a desire to establish individually whether activity was or was not present.
Once that’s known, I think building up rational combinations would be very important. And as we have therapies that are specifically targeted for COVID, where one can have greater confidence that you would see the kind of inhibition of our replication that would take to translate into a clinical effect, I think building up combinations will be very important.
Catalent (UBS Global Healthcare Conference – 5/20)
Another point is given our capabilities as well as our organic and inorganic investments that we’ve made, Catalent has really become a go-to company for COVID-19 therapies and vaccines. We’ve engaged work across all 4 of our business segments, including projects for drug substance, drug product, oral, respiratory, analytical chemistry and then finally, clinical supply services. In total, we’ve been presented with more than 100 opportunities involving about 90 molecules across those opportunities. And that represents, we believe, somewhere around 45% of all COVID-19 products and treatments in development. We’ve signed around 30 deals, including a partnership with J&J for establishment of a new segregated manufacturing capacity in preparation for large-scale commercial manufacturing in the U.S. for their lead vaccine candidate in our Bloomington facility. We also had a press release regarding a partnership with Arcturus Therapeutics to support the drug substance manufacturing of its COVID-19 mRNA-based vaccine candidates in our Madison facility.
Icon PLC (UBS Global Healthcare Conference – 5/20)
Question – Daniel Gregory Brennan: Okay. Well, before we go to virtual, since we have about a little under 20 minutes left, maybe I’ll skip back to virtual so we have time at the end. But maybe just kind of switching gears more towards the environment. I was wondering, can you quantify like what have you provided in terms of the impact — positive impact from COVID so far? How much has COVID trials contributed in 1Q? What are you seeing kind of what’s baked in Q2? And any way to frame the potential benefit as we play out in 2020 and possibly early 2021?
Answer – Brendan Brennan: Yes. I think it’s a solid environment in terms of what we’re seeing there from an RFP perspective, both COVID and non-COVID. Obviously, there’s a lot of activity going on here. As we know, there are hundreds of compounds in development, whether they’re treatments or vaccine candidates for COVID treatment. So — yes, and we’re very, very active in this space. I would want to kind of just caution a little bit here in terms of while there is a lot of activity here, and it will help because it’s obviously — these are vaccine trials and treatment trials, and we’re all racing towards, as I said, winter to ensure that we have treatments and vaccines in place. So it will help us during these — maybe these more fallow months of the summer period that we’re going through in Qs 2 and 3, particularly, probably more so in Q3 as those times, trials really start to ramp-up in terms of patient headcounts.
So I do see it as a help, although probably not substantial enough to really counteract any kind of imbalance as a result of the shutdown of sites.
BioNTech (UBS Global Healthcare Conference – 5/19)
So in addition to that, we’ve entered into other partnerships using a variety of models. I think Pfizer is a prominent one that you see there on the page. We first entered into a research collaboration. This is our first collaboration in the infectious disease space in 2018 to develop mRNA vaccines against flu. And more recently, we’ve expanded that collaboration to develop multiple COVID-19 vaccine candidates, which is currently ongoing in clinical trials. I’ll speak more about that in a few minutes.
…In addition, we have our first program in the clinic outside of oncology in the form of our COVID-19 vaccine program, it’s BNT162 you see on the page, where we’re partnered with Pfizer and Fosun. Pfizer worldwide ex China, Fosun in China. We are currently conducting clinical trials in Germany and in the United States and plan to also initiate trials in China. And this is a broad program for COVID-19, where we have 4 different candidates that we plan to study in the first phase and have an upcoming readout, which I’ll talk about a little bit more in this slide or 2. But we expect it in June-July time frame in terms of first human data.
… And then also, I’ll highlight that in addition to the BNT, the COVID-19 vaccine data, which we expect, as I said, in June or July, we also expect in the second half of the year first data for our bispecific antibody. This is a PD-L1 4-1BB. This is, again, partner with Genmab, 50-50. We see great potential in this molecule to potentially establish a new standard of care in certain solid tumors. In the preclinical setting, we’ve seen this molecule outperform first generation checkpoint inhibitors and are excited to present our first data in humans likely in the back end of the year.
Pfizer (UBS Global Healthcare Conference – 5/19)
Question – Randall S. Stanicky: Yes. And then if we pivot to what’s probably definitely not in Street models, you can look at COVID-19 therapy or vaccine. Obviously with Moderna’s update, a lot of focus around vaccines right now. But as we step back, there’s also a lot of focus on where Pfizer is at. And I think Albert was recently quoted as saying you guys could be in a position to deliver millions of vaccine doses of BN 162 (sic) [BNT162] by October. And so just in light of some of the news over the last couple of days, how are you guys thinking about COVID-19 from either a therapy or vaccine perspective?
Answer – Charles E. Triano: Yes. So we’ve got both. We’re in the clinic now with our partner, BioNTech, right? And so we’ve got an mRNA vaccine — and I’ll say plural, vaccines. We’re testing 4 different variants of an mRNA vaccine. So we’re testing not just the spike protein, which we are testing but we’re not just testing that. That’s Moderna’s approach, and I’m not saying that that’s a bad approach at all. But in addition, we’re testing both the spike and the receptor binding domain. So we — which offers a different hypothesis and allows us then to select based on clinical data, the best 1 or 2 hypotheses to move forward here, right?
So as we look at that, we are looking to dose just under 400 patients with each of the 4 variants of the vaccine. One is a self-amplifying version of that. We have 2 modified RNA and one with unmodified RNA. So we’re looking at those. And the plan would be as we move forward — and I expect we’ll probably be in a position — and we’ve got our partnership here, so I can’t commit to everything. But I would think by June sometime, we should be in a position to have some early antibody data there. And presuming that 1 or 2 of the programs starts to show itself and emerge as probably a best hypothesis, we’d look to move to sort of a stage 2 of testing where we’d get into now closer to 2,500 patients and continue to add on the database.
And so that would run really through the summertime. And then after that, again, presuming things continue to go well and we’re seeing a good profile emerge, we’ve said in the fall, we’d have probably close to 8,000 total participants on vaccine. We’d be manufacturing the lead candidate. We’d be manufacturing at risk. We’d be in a position to have tens of millions of doses, if successful, this year and then hundreds of millions next year. So really kind of growing the clinical study, reporting data maybe not quite real time, but more of a back and forth with the regulatory agencies in terms of, as we get data in, to supply them with data. And we can do a much, we think, quicker analysis of the data.
But I think our view having the 4 different variants of the mRNA vaccine, both the spike and the RBD, may be an advantage here as we look to move quickly toward a vaccination. We’ve got manufacturing capacity at our existing facilities there. So we’re very hopeful that 1 of the 4 programs will look good.
And then on antiviral, we have screened out a lead compound. We’ve had some antivirals in our library back from SARS. They had not been in preclinical tests at that point. But we had, with a third party, screened out and have looked to — looked and have identified a lead candidate that we’ll start looking at that. We’re also looking at Xeljanz. There’s a study going to occur in Italy with Xeljanz, looking if there may be some impact on the cytokine storm that we’re seeing as part of the ramifications of COVID-19.
So several irons in the fire here. Pfizer, in terms of decision-making and resource allocation, moving very, very quickly. And this is led from the top down, from the CEO level down, doing everything we can to, as safely and as quickly, look for vaccines or therapies here. So the company is moving very, very quickly. The whole leadership team and clinical development team, highly, highly focused here, which is what you need, right? You need a company, in not just Pfizer, but you need other companies, large companies that can make the investment, that have the resources in terms of clinical studies, manufacturing.
Syneos Health (UBS Global Healthcare Conference – 5/19)
Question – Daniel Gregory Brennan: Excellent. Okay. And then on the flip side, obviously, there is the drag, but there’s also a potential nice opportunity given all the COVID research that’s ongoing. I know at the call, you discussed some color about the number of COVID trials that you’re involved with, both therapeutics and vaccines. What — how do you see that opportunity progressing? I know it’s only been a short time since the call, but maybe you could just kind of highlight Syneos’ position and kind of the future potential here.
Answer – Alistair Macdonald: Yes. Well, I think it’s an interesting space because it could be very short-lived, and let’s all hope it is, right? So we are — gosh, well, we’ve actually won another COVID program today, so I don’t know the exact number we’re up to now, but it was in the high teens before in terms of the overall number of projects. Now some of those are trials, vaccine trials, et cetera, but some of them are just consulting, engagements, et cetera. So it’s not all big trials. That will bring a faster piece of revenue through the organization, but it doesn’t offset the delays in all the other programs caused by COVID. So it’s not going to fill that hole. But we are engaged in it. I think as the world’s second-largest CRO, we’re always going to be in or around those kinds of requests when things are moving very quickly. So we’re doing our part in that sense. We have a great history and a great track record in infectious disease, vaccines, et cetera. So we’re well equipped to handle that.
Merck (UBS Global Healthcare Conference – 5/19)
Question – Navin Cyriac Jacob: You — Merck announced on the Q1 call that you have a vaccine program underway for COVID-19. There are various different vaccine modalities being explored. Just today, Moderna announced some Phase I data and some preclinical data. There’s a DNA approach. Merck is taking a more traditional approach. But wondering how you think about your approach relative to some of the more novel approaches. Roger on the call, on the Q1 call, highlighted perhaps a need for multiple different vaccines for COVID-19. When you guys think about the reason why multiple vaccines may be required, is that because of different baseline demographics? Or what is the thought process behind why multiple vaccines may be needed for COVID-19?
Answer – Michael T. Nally: Well, I think in many respects, Navin, when we’ve looked at this, right, one of the things that we’ve been very thoughtful about in our approach has been we really don’t understand this virus at all. And the virus was initially sequenced in kind of the mid-January time frame, right? And our understanding of the implications of the virus continue to evolve on a daily basis. We’ve all kind of seen the evolution around the cytokine storms, around clotting, around risk in children. We’ve also kind of had a — it’s taken us some time, and we’re still in somewhat the early days on understanding the fundamental transmission dynamics as well as durability of antibody protection. And so for us, and you’ve seen this in some of the announcements that we’ve made, we’re trying to understand the nature of this virus. We’ve got a partnership with the Institute of Systems Biology (sic) [Institute for Systems Biology] to really try and understand the nature of the virus to kind of ultimately formulate the best approach for both treatment and vaccination.
Question – Navin Cyriac Jacob: As — given the challenges of expanding coverage — or rather, capacity with GARDASIL, how do we — how do investors think about COVID vaccines? I mean Merck is one of the leaders in vaccine production and had obviously an existing franchise in GARDASIL and has had challenges expanding capacity there. Is this piece of vaccine production not fully appreciated by either Wall Street or general public as it relates to COVID vaccines?
Answer – Michael T. Nally: Well, I think you’re hitting on an important point, Navin. The — in our estimation, scale-up will be as profound a challenge as the science, right, to come up with a valid construct. Now the difference with some of the COVID platforms is there’s existing capacity that can be leveraged for those assets and also, the constructs may be more amenable to the existing facilities. The complexity of GARDASIL oftentimes comes in the fact that you’re really combining 9 different vaccines. The 9 different serotypes in GARDASIL 9 makes it a very complex construct. And in doing that, it’s far more complex than the constructs that we’ve seen to date for COVID. Usually, you’re talking a single antigen-based approach, leveraging an existing platform that can leverage existing capacity. I think what you’re going to see in the COVID response, the initial capacity build-out will leverage existing facilities. The — a lot of the challenges will come on the form fill side because this is a challenge across the industry. It will depend on whether or not lyophilization capacity is required. And depending upon which vaccines are successful, how do you quickly shift capacity because we’re going to need to band together across the spectrum, whether it be industry or CMOs, to try and support the most promising technologies going forward. But you also have — within the time line, in the GARDASIL time line, we’re moving at a breakneck pace. But even within that, things like permits and regulatory cycles are more traditionally-oriented. COVID will have, as we’ve seen with all the clinical work, unprecedented time lines on some of those things that can condense in these time lines a bit even as you’re building new capacity.
Moderna (UBS Global Healthcare Conference – 5/19)
Navin Cyriac Jacob, UBS Investment Bank, Research Division – Equity Research Analyst of Specialty Pharmaceuticals and Large Cap Pharmaceutic: Fantastic. Well, very eventful day for Moderna today and obviously, for the entire market as well. Very exciting news that you had to share with us today.
Perhaps for folks who haven’t seen all the data, wouldn’t have a chance to see or listen to your conference call this morning, Tal, if you don’t mind, one or two sentences just summarizing the data we’ve seen so far before I dig into some questions here around the data set for the SARS CoV-2 vaccine.
Tal Zaks, Moderna, Inc. – Chief Medical Officer: Sure, Navin, I’m happy to. So what we’ve announced today is the first positive interim results from the Phase I study that is still ongoing. In today’s announcement, we described data from the first 3 cohorts of subject aged 18 to 55 that were treated with 25 microgram, 100 microgram or 250 microgram in a prime boost regimen of our vaccine. The primary endpoint here is safety and tolerability as well as immunogenicity. And and at a very high level, what we described is as follows. On the safety and tolerability side, we see pretty much what we expect see. And this is a mixture of local and systemic solicited adverse reactions. The — there was no — nothing surprising here. It’s all the things that we’ve seen before and what one would expect from vaccines. There were no great (inaudible) adverse events. There were no serious adverse events. What was notable is that we had 3 cases of severe adverse events, but only in the 250 microgram at the top dose and only on the second dose. So on a CMO, so I always start with safety. Now the — I think the news that got everybody excited here is the immunogenicity. And what we’ve described is that at 25 micrograms already, we are seeing, after a boost, subjects have antibody levels in their blood that are at or above what we typically see in convalescent serum. In fact, they exceed the median point or the halfway point for people in terms of the antibody levels and people who are recovering from COVID-19 disease.
At the 100 microgram, we see, after the boost, clearly a level that is far above that with non overlapping confidence intervals, and so we see a very nice dose response curve across the cohorts. We don’t yet have data for the post-dose 2 for 250, just so we didn’t go into any depth in there. But it’s pretty clear that the prime boost and across the doses, we’re seeing very nice immunogenicity. Now the salient point that I think everybody has been waiting for is not just describing the level of antibodies, but assuring ourselves and the world that these antibodies are what you’d expect in terms of their activity. That’s been done with assessing their ability to neutralize the virus.
Moderna (S3ASR – 5/18)
Our Vaccine Candidate Against SARS-COV-2 (mRNA-1273): In response to the global coronavirus pandemic, we are pursuing the rapid development and manufacture of our vaccine candidate, mRNA-1273, for the treatment of SARS-CoV-2, the novel strain of coronavirus that causes COVID-19, in collaboration with the Vaccine Research Center and Division of Microbiology and Infectious Diseases of the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health (NIH).
… We believe we are positioned to have the first or one of the first approved vaccines for COVID-19, which will give us an opportunity to have a global health impact.
Moderna (Press Release – 5/18)
Biotechnology company Moderna reported on Monday that study subjects who received its COVID-19 vaccine had positive early results.
Reportedly, all eight initial participants in the Moderna trial developed neutralising antibodies to the virus at levels reaching or exceeding those seen in people who have naturally recovered from COVID-19, the press release stated. Moderna has partnered with the National Institutes of Health to develop the vaccine.
This early data comes from a phase 1 clinical trial, which typically studies a small number of people and focusses on whether a vaccine is safe. The information has not been peer reviewed, nor published in a medical journal.
Dr. Tal Zaks, chief medical officer at Moderna, was quoted as saying: “These interim Phase 1 data, while early, demonstrate that vaccination with mRNA-1273 elicits an immune response of the magnitude caused by natural infection starting with a dose as low as 25 ?g.”
At the highest dose, three participants had the most notable adverse events, which were resolved and no serious adverse events were reported, Moderna said, but did not specify what the adverse events were.
According to the World Health Organisation, Moderna is one of eight developers worldwide already doing human clinical trials of potential vaccines against the novel coronavirus. Two others, Pfizer and Inovio, are also in the US, one is at the University of Oxford in the UK, and three others are in China.
AGC (Earnings Call Transcript – 5/18)
In life science business, we are receiving a contract for development and manufacturing of vaccine as well as treatment of COVID-19. We have already signed a contract for one treatment and one vaccine, and there are multiple deals that are currently ongoing.
BioNTech (Bank of America Merrill Lynch Healthcare Conference – 5/14)
And finally, our business model is built around an industry-leading set of collaborations. And these collaborations help us accelerate our own pipeline products towards the market and have also brought us supporting capabilities for technologies, which complement our own pipeline.
You see some examples of these collaborations on Page 5. In the oncology space, they tended to be cost and profit shares, 50-50 model. It’s a model we’ve implemented multiple times here, both with Roche, Genentech, with Genmab, similar model with Sanofi and also more recently with Pfizer in the case of our COVID-19 vaccines.
…And last but not least, our BNT162, our COVID-19 vaccine. As indicated earlier this week, our quarterly — first quarter update call, we do expect our first-in-human data in the June/July timeframe. So now I’ll say a few words about our mRNA cancer vaccines, FixVac and iNeST.
So turning to COVID-19. I’ll spend just a few minutes on COVID-19 because I think, this has been covered quite a lot in many recent calls. But for those of you who are less familiar with our program, and I’ll start by saying that we made the decision in late January, when we saw the news coming out of China, to move into COVID-19 because we thought that our vaccines and our technology could make a difference here. And we thought we had the ability to move very quickly. And indeed, I think, we were able to do that going from concept to start of clinical trials in about 3 months.
So why is mRNA well suited for pandemic vaccines? Well, there’s a couple of key reasons. First of all, I’ll remind you that mRNA is a naturally occurring genetic molecule with defined — well-defined biochemical properties. It’s of high purity and it’s an animal free product, and we’ve shown it in the case of the cancer vaccines, but also others have shown that it’s highly immunogenic and does not require the need for an additional adjuvant. It’s one of the advantages versus some other modalities. We’ve shown and certainly seen in our own studies, that an mRNA-based vaccine has the ability to stimulate both strong antibody and T cell immune responses at very low doses.
And since starting clinical testing with mRNA vaccines in 2013, we have dosed more than 400 patients, in this case, very sick patients, typically, with doses, ranging up to 400 micrograms, which is well beyond what we’re testing here in the COVID-19 scenario. And last but not least, the mRNA, as a modality, enables highly scalable production processes and actually relatively low-cost production as well, at large batch sizes, which make the ability to manufacture hundreds of millions of doses possible.
Catalent (Press Release – 5/14)
PARTNERING FOR TREATMENTS: We are working with several customers on multiple COVID-related antivirals, vaccines, diagnostics and treatments for symptoms and effects of the Covid-19, including Johnson & Johnson’s lead vaccine candidate, Arcturus Therapeutics’ mRNA-based vaccine, Humanigen’s GM-CSF monoclonal antibody, and Ennaid Therapeutics’ antiviral treatment targeted at COVID-19.
Immunomic (Press Release – 5/14)
While ITI is intent on progressing its ITI-1000 program into Phase III trials and advancing other promising product candidates along its pipeline, including a cell-free version of the glioblastoma therapy called ITI-1001, it is simultaneously deploying the UNITE technology to develop a COVID-19 vaccine.
In the past, the UNITE platform has been widely applied to create vaccine candidates for rabies, yellow fever, Dengue fever, hepatitis C and another coronavirus, SARS, so Hearl and his team felt confident that their platform could help solve the COVID-19 problem. ITI has partnered with Epivax to develop the design for the vaccine and Pharmajet to deliver the COVID-19 vaccine via its needle-free injection technology if the vaccine is approved.
‘For COVID-19 we can hit multiple targets on the virus, not just the spike protein. We can pull these together and create a vaccine design that will generate a better, more robust response,’ said Hearl.
‘We have materials prepared and are conducting mouse experiments. Once we have proof of concept in an animal model we can really start looking at human safety studies for our COVID-19 vaccine hopefully later this year,’ he added.
Takeda Pharmaceuticals (Earnings Call Transcript – 5/13)
Question – Fumiyoshi Sakai: I have one question, well, specifically right here. I think this is a question for Weber-san from your expertise. Where do you stand with the COVID-19 vaccine development? Now some companies are very hopeful about commercializing the vaccine within a very short time — period of time. But I really doubt a vaccine is going to be developed so easily. It takes time, and every company is now working in different standard. I know there’s some experts saying we need the vaccine to be effectively defense — defend the infection. But obviously, we are — I’m stopping there — where are we going to go? So I appreciate your input on this. Obviously, some input from Plump-san as well.
Answer – Christophe Weber: Thank you very much, Sakai-san. So I mean, my view is that it’s good to have multiple technology progressing in parallel because it would be too risky for the world to bet only on one technology. So to have 4 or 5 technologies is great. And you see what we have today with the RNA vaccines, adenovirus vaccines and more of the traditional type of technology.
There is — we shouldn’t have too many because you have — you will waste resource if you have like 50 candidates. I think it’s a waste of resource. But it’s — perhaps what we will get — I think that we shouldn’t forget that developing vaccines is very hard. Some vaccines will have no efficacy. Some vaccines will have an efficacy which will wane over time. And sometimes, we need a booster or — and some vaccines will have 50-50 signals as well potentially. So the world think — might think that it’s a slamdunk, the vaccines will come. But it’s far from sure.
I’m optimistic that a few will succeed. The question will be how much risk the world wants to take by shortening the development period of the vaccines, which normally take 5 to 10 years. I mean, if you shorten to 1 to 2 years, you have less data. And therefore, we’ll need to see how we assess that.
And then the last point I will make is that the big issue is the manufacturing scaling. And so scaling the production of vaccines is not easy. Usually, it takes time. And a bottleneck are not necessarily where you anticipate them. So one of the well-known bottleneck in the industry is actually the syringe and the filling of the syringe, which is more late-stage downstream manufacturing process, but that’s a huge bottleneck.
Another bottleneck which is huge in the world today is the lyophilization process. For example, because there is a scarcity of big lyophilizators. So I think that we should be careful at managing expectations. Not all vaccines will succeed. There will be some bad news, some good news as well. I think a few will succeed. And then the scale-up will take time. The scale-up will take time.
And so if you are looking at successful vaccines and we vaccinate the majority of the population worldwide, you are talking about 5 to 10 years.
Question – Fumiyoshi Sakai: That’s really long. But any program of Takeda for any specific project right now ongoing?
Answer – Christophe Weber: Yes. So in fact, when we see the coronavirus back in December, January, we assessed if we should have our own programs. But we didn’t have the best technology to launch our own programs. So we didn’t launch our own vaccines programs. But we are keen to partner, and we are in dialogue with a few vaccines manufacturers, 2 vaccines company and programs to be a partner so that we can help with the scaling up.
Corning (Conference Transcript – 5/13)
Question – Samik Chatterjee: Got it. If I can finish off with a question, just in the time that we have left on Life Sciences now. It still is a small portion of you revenue. But probably one of the areas that (inaudible) very well maintained benefit and kind of leverage some of the growth coming out of this COVID kind of pandemic, help us think about where you are in the process of getting Valor more widely distributed? What else do you need to do to ramp that outside of just production? What do you need to do in the channel, et cetera, to ramp that up more?
Answer – Wendell P. Weeks: I would say this current challenge has actually pointed out some of the weaknesses in the industry that we built Valor to address. So like I said, assuming we get a vaccine or we even get really good strong antiviral treatments. If you look at the capacity in the world, even before the COVID-19 issue, you are about 2 billion doses short of what the world needs in fill capacity and a pharmaceutical packaging. So we developed Valor because it increases the throughput of that fill capacity. And all fill capacity is assuming we invent a good COVID-19 vaccine, we’ve actually got to put it in a pharmaceutical package and then ship it out. If Valor increases the throughput by over 50%, so our existing fill capacity, now all of a sudden goes up dramatically. And if you invest in new fill capacity, we can get like a 100% improvement in throughput once you design around our new package. And it’s a lot safer for patients. The way Valor works is that it’s really — it overcomes one of the issues with borosilicate packaging cause you can have throughput of through cracks that create sterility problems. You can have glass flakes, you have all these sets of issues that endanger patients. And Valor is aimed at addressing all those pieces to be able to deliver things like COVID-19 vaccine cost effectively and safer.
AlphaSense can track FDA drug approvals in real-time using smart search technology. You can also track management commentary in real-time across the entire market, by industry, or watchlist. We expect that the coronavirus vaccine will be an essential theme to follow throughout 2020 and into 2021. Start your free trial of AlphaSense now or login to your account.
As the broader markets reel with panic over COVID-19 economic woes, the US oilfield has been dealt an even tougher hand.
Continue reading “A two-headed black swan pushes the US Oil Industry into crisis”
With sports cancellations, office closures, and stay at home orders, consumers and businesses are seeking out ways to stay connected. From virtual concerts in video games like Fortnite to the rapid adoption of remote work software tools like Zoom, Slack, and Box, tech is leading society’s transformation to a new normal driven by esports (gaming), cloud computing, collaboration software, mobility, and cybersecurity. See our takeaways on how tech management is responding to change below:
Continue reading “Tech Ushers in the ‘New Normal’”
With tens of millions out of work and billions invested in government relief packages, Federal Reserve Chair, Jerome Powell, commented this week that the United States was experiencing an economic crisis “without modern precedent.” Powell’s comments hinted that recovery still remains uncertain and may “come more slowly than we would like.”
Continue reading “The Shape of Recovery: An Economic Crisis Without Modern Precedent”
Demand for goods and services has shuttered across many industries. Executive teams and equity research analysts say shelter in place orders, border closures, and economic slowdowns are contributing factors in the buildup of pent-up demand–a rapid increase in demand after a period of decreased spending. Now, corporate transcripts and equity research reports that mention “pent-up demand” are at an all-time high.
AlphaSense’s AI technology picks up on nuances in human language found in SEC filings, event transcripts and thousands of premium business documents in real-time across the entire market, by industry, or watchlist. Start your free trial of AlphaSense now or login to your account.
Comparing mentions of pent-up demand in transcripts from 2008 to now, we see the count of mentions now far exceed those from similar recessionary periods in the late 2000s, indicating that this period of uncertainty is significantly different from the past.
In the last 90 days, 482 companies have talked about pent up demand. Though, the breakdown of industries focused on it varies greatly. Healthcare equipment & supplies and providers & services companies account for 35% of mentions, as many of them expect a sharp increase in elective procedures and utilization once shelter in place orders are lifted, however, capacity constraints will limit the pace at which that demand can return (see below).
Q1 2020 Molina Healthcare Earnings call (5/01)
“I remind everyone, when we’re talking about the rebound factor is there’s a capacity limitation on how fast things can rebound. There are only so many beds. There are only so many doctors, and there’s only so many hours in a day. And when you have 3, 4, 5 or even 6 months of pent-up demand, it cannot race through the pipe that quickly. There’s a capacity limitation on how fast it rebounds, which adds another variable into forecasting how quickly this could rebound. So I hope that helps, but that’s sort of a view of what March and April look like from an elective and discretionary procedure outlook.”
The same phenomenon is captured in equity research. Mentions of pent up demand are at an all-time high for the past two years. However, the industries attributed to it vary greatly from what we see in corporate transcripts.
For the last 90 days, machinery has become the most frequently mentioned industry related to pent-up demand in equity research, with analysts attributing it to backlogs of orders, OEMs reopening in China, and increased interest in consumer machinery tools. Moreover, hotels restaurants & leisure comes close to machinery in the percentage of mentions. Analysts predict that as travel restrictions are lifted and consumers reacclimate to traveling, we should expect to see a significant release of pent-up demand within the industry. In fact, Disney is already experiencing this; Shanghai Disneyland put tickets on sale for this week and they sold out within hours.
With a global decline in demand, companies are being forced to reprioritize spend and focus on their cash position. To increase cash flow, many have turned to reducing their capital expenditures (CapEx). While many of these reductions are being called out as temporary, the work-from-home trend has received a lot of attention as a place to permanently reduce future spending. The concept gained further traction this week with Twitter announcing that their employees can continue remote work permanently.
We’ve compiled a list of companies that have commented on reducing CapEx in their Q1 earnings call. Take a look below to see how executives are talking about cutting their capital expenses.
AlphaSense can track management commentary in real-time across the entire market, by industry, or watchlist. We expect this to be an interesting theme to follow throughout earnings season. Start your free trial of AlphaSense now or login to your account.
Energy Transfer LP (Earnings Call – 5/11)
Based on our outlook for the current market, we are reducing our 2020 growth capital expenditures by at least $400 million to $3.6 billion, and we are evaluating another $300 million to $400 million for potential reduction this year. Although we anticipate growing the business over the next several years, and we are continually evaluating new opportunities given our asset footprint, we view it as unlikely we will add any major organic growth projects to our backlog for 2021. As we think about future capital spend over the next 3 to 4 years, we anticipate an annual run rate of less than $2 billion.
Marriott International (Earnings Call – 5/11)
Answer – Kathleen Kelly Oberg: So a couple of things. First, I’ll remind everybody once again that a huge proportion of our fees that we charge are revenue based, so there is an automatic decline that has happened as a result of the drop in RevPAR. So that if you think about it, for the mandatory programs and services that we charge, when you also include the deferral and the 50% discount that we gave in April and May, there’s actually very little due at the moment from — on the mandatory programs and services. At the managed hotels in North America, we have also, as I talked about, dropped payroll incredibly as well as all the operating costs of the hotels.
So of course, you do have owners as — just as we too are thinking about how we are managing our payables. Everybody is trying to manage their cash as best they can. But I will say, our owners and franchisees are paying their bills. We have a really very, very small fraction of our hotels that are having trouble paying at the moment. And then, except for a bit of extended payable terms that you can see, otherwise, it’s really all systems go for the moment. And as I said, in April, we actually saw, relative to those numbers I gave, really, a fairly dramatically better situation than the one that I gave you. But we wanted you to have the benefit of our cash planning, so that we are making sure that no matter the situation that we’re able to manage through it.
EOG Resources (Earnings Call – 5/8)
Question – Arun Jayaram: Yes, that’s a clever way to think about it. Just a quick follow-up. You guys cited the $3.4 billion sustaining capital for the 4Q exit rate at $4.20. How fully loaded, Billy, is that $3.4 billion? I know you talked a little bit about the ability to even maybe push that down based on incremental cost savings, but how fully loaded is that CapEx number?
Answer – Lloyd W. Helms: It’s in keeping with how we would run our business. So it’s — the way I would think about it is maybe a little more high-graded than it was in the $4.1 billion capital plan that we announced some time ago that people might remember. In that previous maintenance capital plan, it was pretty much designed to keep each division kind of operating flat. This one is truly — we’re going to go to the wells that have the highest return at today’s prices. And so it is a little bit more high graded you might think of.
It’s still spread across multiple basins, though. So I wouldn’t jump to the conclusion as just one area. It’s still spread across multiple areas. And it includes the infrastructure and facility costs and ESG spending and those kind of things that we typically would include in a normal budget, just maybe at a little bit lesser scale.
Exelon Corp (Earnings Call – 5/8)
At ExGen, the $0.10 per share degradation reflects $0.05 of drag from the very mild Q1 weather and then $0.05 of COVID-19 impacts on load net of our cost and business initiatives. In addition to the O&M savings, we remain focused on cash at ExGen and have lowered CapEx by $125 million in 2020. We expect our earnings to be most impacted in the second quarter and have provided adjusted operating earnings guidance of $0.35 to $0.45 per share.
Siemens AG (Earnings Call – 5/8)
Across all functions, we are cutting back in discretionary spending. CapEx projects are reprioritized in a stringent way. And we focus very closely on securing customer payments and ensuring supplier payments to keep supply chains intact. We are also well on track to achieve our targets for lean and effective governance to reduce costs by EUR 300 million in fiscal 2021.
Microchip Technology (Earnings Call – 5/7)
We have prepared the company for a downside scenario by putting the employees on a 10% salary cut and adjusting the factories by reduced work hours or rotating time offs. We have also frozen all business travel and cut discretionary expenses.
Regarding CapEx, we finished fiscal year 2020 with a CapEx of $67.6 million, a significant reduction from fiscal year ’19 CapEx of $229 million. This is consistent with what we have said before that our CapEx is divided between growth capital, maintenance capital and new products and technology capital. In a fiscal year like 2020, in which our net sales declined, the growth capital, which is the largest portion of CapEx, declines to virtually nothing. And therefore, the total CapEx declined significantly. We expect CapEx for fiscal year ’21 to remain low in the range of $50 million to $70 million.
Booking Holdings (Earnings Call – 5/7)
Second, we repurchased $1.3 billion of our stock in Q1, almost all of which was purchased under a stock buyback plan we filed last November. We halted buybacks as soon as we recognize the growing impact of the pandemic. Third, we had CapEx of $80 million in the quarter. And finally, the value of our investments decline in parts by the $307 million unrealized loss on equity securities and the $100 million impairment related to a strategic investment that I mentioned earlier.
In addition, we had $106 million decline in investment value that did not impact the P&L but was reflected in the balance sheet. The majority of the remaining $288 million difference between cash and investments at year-end on March 31, is primarily due to the timing of the settlement of sales was from corporate bonds that were classified in prepaid expenses and other assets at the end of March. These sales were settled in April and moved into cash and investments.
In our efforts to stabilize the business from the immediate shock of the crisis, we’ve taken several steps to show up and bolster our liquidity position. We halted repurchasing our stock, and we will not initiate repurchases until we have better visibility into the shape and timing of a recovery from the COVID-19 pandemic
Franco-Nevada Corp (Earnings Call – 5/7)
Question – Cosmos Chiu: For sure and maybe as a follow-up Jason, as we talked about there has been cutbacks in CapEx but I just want to confirm once again, it’s got a bit of a lagging effect to us. So even if they cut the oil and gas producers even if they cut CapEx now the impact doesn’t come later on right?
Answer – Jason O’Connell: Yeah, that’s correct. So the nature of our royalties are that there is a deferral between when drilling happens when wells are completed, when production comes online and then we actually receive our check. And so we expect that drilling levels were reasonably strong in the latter half of 2019 and even into early 2020 So we will continue to receive the benefit of that drilling into Q2 here even into potentially early Q3, so the majority of the impact that we think we will see from the reduction in capital spend will occur in the latter half of this year and then into 2021.
Otis-Worldwide (Earnings Call – 5/7)
Now Q2 is going to be a little bit challenging in Europe and China — Europe and the U.S. China is going to recover, but we will see some pressure in Q2 in Europe and the U.S. And then — so our cash flow will be a little bit more skewed towards Q3 and Q4 than it typically is, but you would expect that given the overall macroeconomic environment. But we feel good about our guidance. I think we’ve done — we’ve taken good steps to offset and mitigate some of the impact that is coming through from the drop in net income from our previous guide to this guide. I mean if you look at the guide-to-guide on our net income, probably down at the midpoint at AFX, about $150 million. And we’ve mitigated that through lower Capex. We’ve reduced our interest cost. There are some tax payments that we try to manage, some of that coming through the CARES Act. But we try to put all that in and yet drive $975 million of cash as kind of the midpoint. So it’s — we feel good about our back-end recovery in cash flow.
Anheuser-Busch InBev (Earnings Call – 5/7)
Question – Jean-Olivier Nicolai: Brito, Fernando, just one question and one follow-up, please. Could you give us a few examples, in the U.S. market specifically, on the measures you’re taking to protect your margin? And just a quick follow-up on the capital structure. I mean ABI clearly has no liquidity issues, as we’ve seen from your prioritization, a new refinancing and then the announcement we see this morning. But I was just wondering how you’re planning to optimize your capital structure in the medium term? You reduced the dividend already. Can we expect a CapEx reduction? Can we expect more noncore disposals? Or should we just assume that the bulk of that net debt-to-EBITDA reduction will come through EBITDA growth? Obviously, for the medium term, not asking for a guidance for this year or next year.
Answer – Carlos Alves de Brito: Well, in terms of the U.S. in terms of measures to protect our margins, we’re doing everything we — I just mentioned in Brazil. So we’re looking at discretionary spend. We’re taking a hard look at sales and marketing, at CapEx — the OpEx and CapEx, and trying to put the money in channels and products that consumers are demanding more. So trying to put more money behind e-commerce initiatives, direct-to-consumer initiatives. More money for ensuring the off-trade, more money behind bigger packs; trying to promote less because today, there’s no need for that; trying to phase out some product new introductions, innovations because at this point, it doesn’t make sense to do introductions; trying also to curb some media spend and put more online; so trying to be more in tune with consumers and trends, so we allocate resources in a more effective way. So it’s a big time something we’re doing.
In terms of capital structure. Again, the capital allocation priorities are clear. So the first priority will continue to be to invest money behind our business. U.S. business is doing very well. You saw the first quarter, Olivier. Second is to deleverage. We have a target of getting to 2x net debt-to-EBITDA. This remains our commitment. And we’ll continue to prioritize debt repayment in order to meet this objective. And third is M&A. And fourth, giving money back to shareholders.
Becton Dickinson and Co (Earnings Call – 5/7)
Question – Robert Justin Marcus: I’ll ask both of them all in one. I noticed you took down your CapEx for the year by about $200 million. Hoping you could just touch on your thoughts around pipeline delays that are potential coming out of this, what should and shouldn’t be affected? And then also, how are you thinking about your ability down the road? Is this reduction in CapEx temporary? Could we see something more permanent come out of this? Really, just how you’re thinking about capital, investing and your capital allocation in general, plus the pipeline.
Answer – Christopher R. Reidy: Yes. I’ll start with that, Robbie. Thanks for the question. And as you might imagine, the first thing that we wanted to make sure of is that we were able to mitigate the cash impact from the headwinds from COVID. And we’ve made great progress on that in a few short weeks. And we’re able to mitigate a substantial part of the — what we see as the capital impact. And we think that was the prudent thing to do. Now one of those things that we did to get there, in addition to some of the P&L items that we talked about that clearly impact P&L and cash, but from a cash perspective, one of the items that we did take down was the CapEx. And we’re prioritizing mission-critical capital spending. And we’re cutting and basically delaying some of the investments that we’re making that are more discretionary. And we’re being very careful on that because we want to make sure that we’re not cutting anything that would inhibit any capacity going forward. So we’re being very targeted on that. And it clearly is not a permanent adjustment in CapEx. We would expect that when we come out of this pandemic, that we would — some of those things that we’re cutting, we will — are just deferring and we’ll have to spend that. And so you can expect us to go back to the normal $900 million to $1 billion kind of thing. And that is particularly true as we think about investing in areas that are necessary for COVID. We continue to invest in those areas and ramp and make sure that we have capacity. As Tom has articulated on a number of fronts, we’re ramping capacity. So think of that as a temporary reduction.
Waste Connections (Earnings Call – 5/7)
In terms of operating costs, on the commercial side, the extent to which we can reroute or otherwise adjust our operations to reflect lower activity levels, varies by market and depends on the pace and severity of reductions as well as the expected timing and shape of any recovery. That said, we are already realizing savings in many variable costs, including third-party brokerage and disposal, labor and fuel, along with reductions in discretionary and nonessential expenses.
With regard to capital expenditures, we’ve proactively cut approximately $110 million for the year or about 20% of CapEx in light of the slowdown in activity. However, we’ll remain opportunistic during this period if presented attractive offers to purchase additional fleet, equipment or longer-term landfill expansion acreage.
Raytheon Technologies (Earnings Call – 5/7)
And as I mentioned earlier, we’re taking immediate actions to reduce costs by $2 billion and preserve liquidity with $4 billion cash actions. We’re reducing capital expenditures in the investments, we’ve deferred merit increases across the commercial businesses and we’re cutting discretionary spending, just to name a few. While many of these measures have been difficult, it is the right thing to do for the business.
Suncor Energy (Earnings Call – 5/6)
We have decided to target a further reduction in our 2020 capital expenditure program, revising the range from $3.6 billion to $4 billion. This represents an additional capital reduction of $400 million at midpoint compared to our March 23 guidance. Our Board of Directors remains committed to the overall business strategy of leveraging our long-life, low-decline asset base while providing energy to our customers and returning value to shareholders.
However, after having taken into account the significant capital and operating cost reductions announced to date, the Board believes that a reduction of the current level of dividends is required to drive down the breakeven of the company to a WTI price of USD 35 a barrel. As a result, the Board has decided to reduce the dividend by 55% to a quarterly cash dividend of $0.21 per common share down from $0.465 per common share. This will take effect for the dividend payable on June 25, 2020. The total actions taken with today’s announcement and the March update targets a reduction in our capital spend by $1.9 billion or 33%, and our operating cost of $1 billion or 10%. It also decreases our use of cash by $4.5 billion on an annualized basis versus our original 2020 plan. The implementation of these decisions is expected to reduce our breakeven costs from USD 45 a barrel to USD 35 a barrel, covering all planned operating and administrative costs, sustaining capital and dividends. These actions not only support our strong balance sheet, financial health and high investment-grade ratings but adds to the resilience of the company to maintain its focus on long-term value creation.
Waste Management (Earnings Call – 5/6)
Capital spending in the first quarter was $459 million, which is down modestly when compared to the same quarter in 2019. While we continue to prioritize investments in the long-term growth of our business, we are now flexing our capital spending to align with current volumes and expect to see a significant decline in capital spending beginning in the second quarter of 2020.
For the full year, we are targeting capital spending reductions of about 10% from planned levels. Landfill capital makes up about 1/3 of our overall capital spending, and we expect most of the reductions in this category as we adjust cell construction schedules with declines in volumes. We also see opportunities to flex spending for containers and heavy equipment.
American Electric Power (Earnings Call – 5/6)
Answer – Julien Patrick Dumoulin-Smith: I hope you all are well. Perhaps just to pick up where the last question left off to start here. On guidance in the 2020 just lower, how do you think about the reduction in CapEx? I just want to reconcile this. I mean it seems as if you’re not really changing FFO-to-debt expectation as you are bringing down CapEx altogether. But why do that relative to no change in earnings? So just can you walk through the thought process there? And then also, it seems that it doesn’t necessarily have too much of an earnings impact given the corporate nature of some of that CapEx, but I just want to make sure we’re thinking about that correctly as well.
Answer – Brian X. Tierney: Sure, Julien. Thanks for the question. So we are anticipating there to be some reduction in cash flow this year associated with 2 things: one, lower customer demand; and then two, we have eliminated disconnects currently. And so we think that customers will pay us slower than what they have in the past. We’re not seeing the impact of that in a significant way yet. It’s too early. But in anticipation of lower cash flows to maintain those FFO-to-debt metrics, we felt it was imprudent to at least engage the motor on our ability to scale back CapEx.
In regards to the no impact on future earnings, we try to do it in places that have either lower regulatory lag or the increase in earnings isn’t as great. So Nick mentioned that some of that reduction is in the competitive renewable space. And some of that reduction is also at corporate capital, things like IT and things like that, that are much slower to flow into customer rates during rate cases. Things that we were careful not to cut were things like transmission where we’re spending on customer resilience and reliability. And we have those formula-based rates to update and get that CapEx into rates on a fairly efficient basis.
So we were really thoughtful about how we cut that small — or shifted that small amount of CapEx and made sure that it wasn’t impacting earnings.
Progressive Corp (Earnings Call – 5/6)
Answer – Philip Michael Stefano: Yes. I wonder if you could talk a little more about the operating expenses. Maybe we can put aside the advertising spend, because it feels like that’s been pretty well-covered. But are there discretionary expenses in the business or levers that you can pull down at a time like this to maybe help support the expense ratio improvements that may come back next year? Or at least, to offset some of the increases in allowance for doubtful expenses or other things like that to maybe neutralize the upside expense pressures you might be seeing?
Answer – Susan Patricia Griffith: I think we always have different levers. And I think you’ve seen in the past when things that have happened where we’ve gotten closer to our [96.] We’ve done that. We’re really not in that position now because of the margins. And like we talked about, we have the expense for the 0.8 points for the doubtful accounts, and we’ll watch and see how that continues to impact us through April. We’re always looking at expenses, how to do more with less, et cetera. This is an odd time. But I think once we get through this and things are back to normal and claims frequency is back to normal, we will continue with our expense management.
A lot of this, we’ve learned about how many people work from home. And so initially, before the COVID happened, we probably had maybe about 10,000 of our employees of our 43,000 employees working from home. Now we have 95%. As we think about returning, there could be an advantage for real estate because many of those people will be very efficient and effective working from home, maybe be better for them.
CVS Health Corp (Earnings Call – 5/6)
Once we return to normalcy, we expect to repay the incremental debt. We will also continue to prudently manage our operating expenses and will reduce our planned capital expenditures by $200 million this year. Our long-term leverage target remains unchanged, and we continue to prioritize paying down our debt and maintaining our dividend with no share repurchases planned until we meet our leverage target.
Republic Services (Earnings Call – 5/5)
Finally, turning to expense and CapEx. As we continue to operate during this uncertain time, we are adjusting our cost structure to align with real-time changes in volume. Importantly, we estimate approximately 60% of our total cost structure, including cost of operations, SG&A and depreciation and amortization, is variable. We are closely managing these variable costs.
For example, we put labor management strategies in place to redistribute the workload. As a result, we’ve reduced total overtime hours by approximately 37%. We are also reducing discretionary spending, such as travel and are scaling back on capital expenditures. For example, approximately 10% of our capital budget or a little over $100 million is for growth capital, which we will no longer need to spend this year.
Additionally, as volumes decreased, the replacement cycle of our assets naturally extends. Therefore, we are intelligently scaling back on replacement capital to align with changes in demand, including the construction of landfill air space and the purchase of replacement trucks, containers and equipment. Overall, we have been quickly adapting our operations based on changes in customer demand.
The Walt Disney Company (Earnings Call – 5/5)
We also identified opportunities to reduce our capital spending, and we now expect total CapEx for fiscal 2020 to be about $900 million lower than our prior guidance or $400 million below prior year, driven primarily by paused construction and refurbishment work due to the temporary closing of our parks. While it is still too early to consider more specific implications for capital spending in fiscal 2021, we remain confident in our investment decisions and the resiliency of our businesses.
Total SA (Earnings Call – 5/5)
Answer – Christyan Fawzi Malek: So a couple of questions. First, regards to the capital frame and the logic of sustained dividend at these levels in the context of CFFO. And the second question is on the impact of the CapEx cuts on the future oil production. So regarding the level of the dividend, now your dividend as a percentage of CFFO is on the highest. It appears that the European oil is just under 40%. Regardless of the impact from this current crisis, do you think this is a relatively high level and it limits your ability to spend more on energy transition and your oil growth? Because some of your peers have argued that cutting the dividend is a key enabler.
The second question sort of links into that, which is to understand how much oil production has been deferred as a result of the CapEx cut this year? And if you were to raise CapEx to simply round if oil moves higher, would you allocate it into New Energies or oil? Or can you give us a sense of how you sort of reallocate that marginal growth in CapEx? I’m just trying to understand on whether the updated energy transition policy comes at the expense of lower market share in oil over the medium term?
Answer – Patrick Pouyanné: I think — by the way, today, again, we have to — as I said in my presentation, we are very comfortable. First — we know that in oil and gas company, we’ll have some volatility and we have to accept a certain period of time to use, to leverage this balance sheet in order to maintain a certain level of return to the shareholders. At the same time, again, as I said, if the oil is at $30 for longer, for very long, there is a certain limit to what we can do. But at $40 per barrel, the cash flow generation, if in a stable activity, I would say, is around $19 billion per year. $19 billion, $7 billion of dividend, I have $12 billion for investing. I think we are fine with that. We have — that means that, yes, we have to make some choices. And from this perspective, on the second question, I think with $1.5 billion to $2 billion as an average, we are fine to grow it steadily.
This morning, you noticed probably in the — will come back on it in the climate statement, but we said that we reached 20% of our capital allocation by 2030 or sooner, which means we have time to grow it. We think that there is also a certain level to build. Is it — so I don’t think that this — and I understand perfectly the question, but we — but this dividend at this level is impairing the execution of our strategy. The CapEx cuts impact on this year production are really minimum. I mean when you have a CapEx program of infill wells that you cater the second quarter and third quarter, the production could produce is, I think, some matter of 10,000. By the way, this would have been done in countries like Angola where you have some quotas. So I think our decision was just maybe anticipating the OpEx decision. So I think it’s almost very limited impact, in fact, for this year. For next year, it has a better impact.
Sysco Corp (Earnings Call – 5/5)
In the fourth quarter of fiscal 2020, the expense reductions, while significant, will be more than offset by the top line sales volume decreases that we are experiencing. Additionally, we have reduced capital expenditures to only business-critical transformational projects. Physical projects like building expansions, fleet purchases, they have been put on hold. Our CapEx investments will focus on those things that will improve Sysco’s capabilities and will allow us to win market share in the future.
DuPont de Nemours (Earnings Call – 5/5)
In the quarter, we closed the sale of our Compound Semiconductor Solutions business, generating over $400 million in gross proceeds. We are also taking the prudent action to pull back on certain CapEx, reducing our spend by about $500 million versus the prior year. We elected in mid- to late-March to pause share buybacks after we had repurchased approximately $230 million in the quarter. While shareholder remuneration remains a critical component of our financial policy, this was a practical action at the time in order to conserve cash.
Ferrari (Earnings Call – 5/4)
Turning to our revised guidance for the year. You will first note that we have widened the range given the lack of full visibility and the current unpredictability of events. Our guidance rests on the numerous factors I’ve already mentioned. It includes several cost-cutting initiatives across-the-board and a delay in several planned activities as well as a reduction in capital expenditures of some EUR 75 million. We have been extremely judicious in determining which expenditures to cull following two key principles. The first is to retain total flexibility as each month unfolds and the second is not to impair our competitiveness going forward while retaining our full responsibilities towards our suppliers, our dealers, our clients and, first and foremost, our employees.
Our full year guidance in simple terms reflects a very weak second quarter. In fact, it accounts for the bulk of our erosion versus our previous guidance. Indeed, at the low end of our EBITDA range, it reflects approximately 75% of the erosion versus our prior guidance and the entire erosion versus the prior year. At the higher end of the range, the second quarter will account for the entire shortfall relative to both our previous guidance and the prior year, such that it assumes a V-shaped recovery with the second half of the year generating an increase in revenues of some 10% and an EBITDA growth of some 15% versus the prior year, and this despite the challenges we face beyond our core business.
Chevron Corp (Earnings Call – 5/1)
That said, the pandemic is presenting challenges. Restrictions on the movement of people and goods and positive COVID cases in 6 of the more than 100 residential camps in Tengiz have triggered changes. While critical path construction activities proceed, we’re temporarily demobilizing noncritical path personnel. As a result, we anticipate some degree of impact to project cost and schedule, but it’s too early to quantify this in any meaningful way. Our forecast of 2020 capital expenditures for the project has been reduced by about $1 billion, our share, due to deferred activity, cost mitigations and expected currency benefits.
Turning to our overall capital outlook. We’re further lowering our full year 2020 organic capital guidance to as low as $14 billion, down from $16 billion announced in March. Second half CapEx could be as low as $6 billion or a run rate up to 40% lower than our original budget. The incremental reductions since our March press release are primarily focused on TCO and short-cycle investments.
Exxon Mobil Corp (Earnings Call – 5/1)
We set an aggressive objective: reduce spend without compromising the project advantages or returns. Any inefficiencies had to be offset with market savings or other efficiencies. I’m very pleased with the work we have done to date. Through extensive collaboration, we’ve identified opportunities to reduce our CapEx by 30%, down to $23 billion, and more than offset deferral costs, preserving the returns and project advantages.
Estee Lauder (Earnings Call – 5/1)
For the 9 months, we generated $1.95 billion in net cash flows from operating activities, an increase of 11% from the prior year. We invested $468 million in capital expenditures and $1.04 billion to acquire the remaining interest in Dr. Jart+. We also used $883 million to repurchase shares and $502 million to pay dividends. To further enhance near-term liquidity, we are focusing our capital investment on areas necessary for future growth and paring back in areas such as retail renovations and office improvements. We cut our planned capital expenditures by 1/3 and now expect to spend between $600 million and $650 million for the full year.
Additionally, we have suspended share repurchases for the balance of this fiscal year and our quarterly dividend that would have been paid in June of 2020. All of these activities greatly enhance our ability to manage through the shutdown in brick-and-mortar for an extended period of time while we focus on stimulating greater consumption online.
Honeywell (Earnings Call – 5/1)
Moving to PMT. The dramatic volatility and decline in oil prices related to the OPEC+ dispute, coupled with the COVID-19-related supply chain disruptions, has created a challenging environment. We are encouraged by the OPEC+ production cut agreement, and we hope for even broader action. However, we need to see a sustained increase in demand to see a more meaningful impact in the marketplace. As we’ve said in the past, oil price volatility and sustained pressure on prices often leads to project delays and customer CapEx and OpEx budget cuts, which is what we are seeing today. We expect a steep decline in refining production in the second quarter and continued weakness in gas processing. The reduction of customer CapEx and OpEx budgets will create headwinds for our Products businesses, in Process Solutions and UOP with declines in field services, equipment and catalyst shipments. Additionally, we anticipate new projects will push to the right, putting pressure on UOP licensing and engineering volumes in the near term.
Illumina (Earnings Call – 4/30)
That said, we are managing expenses very carefully. In the near term, there are savings associated with restricted discretionary expenses, including travel, marketing events and consulting, and slower hiring associated with a lengthening hiring cycle. We are also reducing spend on contract and temporary labor in certain functions. Finally, we have delayed certain non-R&D projects and delayed or canceled certain capital expenditure projects. Compared to our original budget for the year, second quarter operating expenses have been reduced by more than $40 million. We are also preparing for additional cost savings opportunities if shelter-in-place orders remain prevalent into the third quarter. While we are all hoping for loosening of restrictions in the near future, we have planned for a range of scenarios that we can activate if needed. We will monitor the situation carefully throughout the rest of the second quarter to assess whether we need to take more aggressive actions more quickly. This includes a careful reassessment of our capital investment plans and gating programs in some cases. In the meantime, we continue to hire and onboard new team members virtually but retain the flexibility to pause or limit hiring or slow other investments if the pandemic is prolonged.
Stryker Corp (Earnings Call – 4/30)
In addition to the discretionary spending controls I previously outlined, we have also taken steps to conserve cash, including reductions in planned capital expenditures and project spending, focusing on opportunities and accounts payable and slowing M&A activities. Considering our cash holdings and available credit lines, from a liquidity standpoint, we are well positioned. We currently have available credit lines, none of which are drawn on at this time, of approximately $3 billion.
Conocophillips (Earnings Call – 4/30)
Question – Devin McDermott: There are a few asked already on capital spending and the balance sheet, but I wanted to just follow-up in a bit more detail on that. And you provided back at the Investor Day, your helpful analysis of stress testing. The balance sheet and cash flow profile through a low commodity price period. And clearly, what we’re seeing right now is a bit unprecedented, different than that stress test, but the balance sheet is still a very strong competitive edge for you.
I was wondering if you could just give an update on how you’re thinking about the required cash balance and willingness to take on kind of additional leverage here or early in on the balance sheet, to the extent we see a sustained period of long — of low prices over the next few quarters to years? And at what point further CapEx cuts become consideration?
Answer – Don Wallette: Devin, this is Don. I’ll take that. As far as cash balances back at the Analyst Day, I think we said that we had an operating requirement of about $1 billion, and we felt like we wanted to keep a reserve balance on top of that of $2 billion to $3 billion. I think generally, we feel the same way about it. Technically, it’s probably — those numbers have probably come down a little bit. Operating cash is not quite $1 billion because — mainly because of some of the assets that we’ve sold, we just don’t need that much.
And the reserve capital or the reserve cash — that’s a number that we recalculate every month based on our outlook for the next six to 12 months. And that number has probably come down a little bit because of our lower spending on Capex, OpEx by the suspension of our buyback program. But it might be $1 billion lower than what we were thinking in November, but that’s about it.
Royal Dutch Shell (Earnings Call – 4/30)
Firstly, we will focus on the reduction of cash capital expenditure. And for the full year 2020, we will see a reduction to $20 billion or below compared with a plant level of around $25 billion. So far, we have made good progress in working to reduce cash capital expenditure. The approach there is to, of course, protect our assets, spending what is required on integrity, continue with the projects, which a final investment decision has already been taken, and focus on robust investments that will give us short-term return. So we have gone through a detailed project-by-project review in each of our businesses, and we, indeed, expect to achieve the $20 billion or lower cash CapEx spend this year. And some of the recent announcement that you may have seen are the result of those ongoing project reviews
McDonald’s (Earnings Call – 4/30)
In terms of capital expenditures, we’ve taken a very practical approach to development activity. We suspended Experience of the Future groundbreaks in the U.S. and new restaurant openings around the world as COVID-19 began to spread. Given that our first quarter CapEx is typically about 20% of the full year and many projects are delayed or on hold, we now have some flexibility with decisions for the majority of our planned capital spend for the year. As a result, we’re reducing our 2020 spending by about $1 billion from our initial expectation of $2.4 billion.
Facebook (Earnings Call – 4/29)
Turning now to capital expenditures. Our significant investments in infrastructure over the past 4 years have served us well during this period of high user engagement. We plan to continue to grow our CapEx investments to enhance and expand our global infrastructure footprint over the long term. In 2020, we now expect capital expenditures to be approximately $14 billion to $16 billion, down from our prior range of $17 billion to $19 billion. This reduction reflects a significant decrease in our construction efforts related to shelter-in-place orders. Given the strong engagement growth and related demands on our infrastructure, this year’s CapEx reduction should be viewed as a deferral into 2021 rather than savings.
This week, Uber and Lyft reported earnings after both announced layoffs as a part of cost-cutting measures. How did these two gig economy giants fare amidst shelter-in-place orders and decreased demand across the globe?
In March, tech companies (Amazon, Microsoft, Google, Twitter, and Facebook) led the initial charge toward a fully-remote workforce amid the spread of COVID-19. Since then, management teams across sectors have grappled with the “new normal,” waiting to see if a remote workforce is productive and cost-effective.
Continue reading “Remote work becomes the ‘new normal’… but for how long?”
