Earnings Call Transcripts Analysis, Q3

FY2017
December 5, 2017
Executive Summary
Hamilton Place Strategies analyzed quarterly earnings call transcripts of U.S.
public companies to identify key issues influencing the business communitys
decision making. For this report, we analyzed earnings call transcripts from the
fourth quarter of fiscal year 2016 to the third quarter of fiscal year 2017.
Key Findings:
The number of earnings calls mentioning President Trump declined 81 percent
between January and late November.
Mentions of tax reform have increased by 137 percent since last quarter.
Not surprisingly, healthcare reform saw the largest decrease in policy mentions.
Mentions of company culture inclusive of corporate social responsibility,
diversity, and harassment have increased 32 percent year-over-year in 2017.
Mentions of cybersecurity were mostly found in IT sector calls (62 percent of
2017 calls mentioning cybersecurity topics came from the IT sector). Other
sectors did experience an uptick in cybersecurity mentions from 2016 except for
healthcare.
Amazon was mentioned on almost eight percent of all earnings calls so far in
2017, outstripping Google in second place with four percent.
1
Agenda

Government And Policy Issues

Special Economic Issues
 GOVERNMENT AND POLICY OVERVIEW

Discussion Of Policy Issues Jumped In Q3 2017 After A

Steady Decline In Earlier Quarters
Number Of Earnings Calls With Government Percent Of Total Earnings Calls Mentioning
Or Policy Mentions Each Issue
Total Earnings Calls Government
Total Calls With Govt. Or Policy Mentions Policy

3,217 3,117 31% 31%

2,956 3,021

16%
14% 14%
1,225
11% 10%
911 10%
751
496

Q4 2016* Q1 2017 Q2 2017 Q3 2017 Q4 2016* Q1 2017 Q2 2017 Q3 2017

Source: Bloomberg Terminal, HPS

*Q4 2016 earnings calls occurred after the November 2016 elections 3
GOVERNMENT AND POLICY ADMINISTRATION AND CONGRESS

The Percentage Of Companies Mentioning The

Administration Continued To Decline In Q3 2017
Government Mentions In Earnings Calls Administration
Congress
25 -83%
Percent Of Earnings Calls

20

15

24%
10
14%
5 10% 11%
8% 8%
5% 4%
0
Q4 2016 Q1 2017 Q2 2017 Q3 2017

Source: Bloomberg Terminal, HPS 4

GOVERNMENT AND POLICY TRUMP

Direct Mentions Of President Trump In Earnings Call

Transcripts Remained Low After Post-Election Spike
Earnings Calls Mentioning Trump Trump Admin. By The Numbers
Number Of Earnings Calls

144
81 The percentage drop in
150 calls mentioning President
Trump by name from January
100 to November
64
50
23 27 Materials The sector with
the largest percentage of calls
0
Q4 Q1 Q2 Q3 mentioning the Trump
2016 2017 2017 2017 Administration in Q3 2017 (10
percent of sector calls)
Topics Associated With Q3 Trump Mentions

Tax
Economic Issues
Iran
Zero The number of times
Fed Chair Pick Trump was mentioned this
International Trade quarter in Consumer Staples
Opioid Epidemic
Commission and Telecom sector calls
Source: Bloomberg Terminal, HPS 5
GOVERNMENT AND POLICY SECTOR BREAKDOWN

Top 5 Sectors Most Often Mentioning Government And

Policy Issues Have Remained Relatively Unchanged
Percent Of Total Government And Policy Issue Mentions In The Top 5 Sectors
Q3 2017 Q2 2017

Mentions No Mentions Mentions No Mentions

Utilities 48% 52% 75 Utilities 37% 63% 76
Financials 30% 70% 428 Financials 23% 77% 428
Real Estate 30% 70% 178 Real Estate 21% 79% 178
Industrial 23% 77% 403 Industrial 18% 82% 412
Materials 22% 78% 139 Telecom 18% 82% 33

Q1 2017 Q4 2016
Mentions No Mentions Mentions No Mentions
Utilities 48% 52% 77 Utilities 75% 25% 75
Financials 35% 65% 433 Industrial 55% 45% 402
Real Estate 33% 67% 182 Financials 53% 47% 425
Industrial 28% 72% 431 Real Estate 50% 50% 181
Healthcare 25% 75% 521 Materials 45% 55% 139

Source: Bloomberg Terminal, HPS 6

GOVERNMENT AND POLICY ECONOMIC ISSUES

Tax Reform Saw The Largest Increase In Mentions

While Healthcare Saw The Largest Decrease
Select Issues Discussed In Earnings Calls That Mentioned Policy*

Q4 2016 Q1 2017 Q2 2017 Q3 2017 Key Takeaways

Mentions of tax
Tax Reform 72% 76% reform increased
53% 45%
137% from Q2 to Q3
2017
Healthcare 16% 22% 32%
11% Mentions of
Reform healthcare reform
Financial dropped 51% from
20% 21% 18% 8% Q2 to Q3 2017
Regulation
Despite its
prominence in the
Infrastructure 13% 13% 10% 6% news, trade is lightly
discussed on
earnings calls
Trade 10% 10% 12% 11%

Immigration
Reform 2% 3% 2% 1%

Source: Bloomberg Terminal, HPS

*Total number of earnings calls mentioning policy issues in Q4 903, Q1 449, Q2 304, Q3 428 7
Agenda

Government And Policy Issues

Special Economic Issues
SPECIAL TOPICS CYBERSECURITY

Calls Mentioning Cybersecurity Have Risen Steadily

Year Over Year Besides A Drop In Q2 2016
Number Of Earnings Calls Mentioning Cybersecurity And Related Events (Hacks, Data Breaches)

July 22, 2016: DNC email leak

300 Aug. 15, 2016: NSA tools leak
240
Dec. 13 2015 (Q4): 272
250 Target breach revealed Oct. 2, 2017 (Q4):
208 Equifax breach revealed
Count Of Earnings Calls

200 Summer 2017:

Nov. 24, 2014: Global ransomware attacks
156 178
Sony cyberattack
150 June 5, 2015:
OPM breach
revealed
93
100
Q2 2016: Cybersecurity mentions drop to
lowest level since early 2014
50

0
2013 2014 2015 2016 2017

Source: Bloomberg Terminal, HPS 9

SPECIAL TOPICS CYBERSECURITY

IT Leads Cybersecurity Mentions With 24% Of Sector

Discussing, Industrials Are A Distant Second With 7%
690 Information Technology
Number Of 2017 Calls Mentioning Cybersecurity

680
Industrials
130
120
110
100
90
80
70 Financials
60 Consumer Discretionary
50
40
Real Estate Telecommunications Services
30
Health Care Materials
20
Utilities
10 Energy Consumer Staples
0
0% 1% 2% 3% 4% 5% 6% 7% 24% 25%
Share Of Sector Mentioning Cybersecurity In 2017
Source: Bloomberg Terminal, HPS 10
SPECIAL TOPICS HURRICANES

Nearly Half Of All Q3 2017 Earnings Calls Mentioned

Hurricanes Or Natural Disasters
Mentions Of Natural Disasters On Earnings Calls, Mentions Of Specific Hurricanes On
Q4 2016 Q3 2017 Q3 2017 Earnings Calls
Total Earnings Calls
357
Total Natural Disaster Mentions

3,217 3,117
2,956 3,021

208

1,484

71
577 620
481

0
Q4 2016 Q1 2017 Q2 2017 Q3 2017 Harvey Irma Maria Jose

Source: Bloomberg Terminal, HPS 11

SPECIAL TOPICS COMPANY CULTURE

Mentions Of Company Culture, Diversity, And Inclusion

Have Increased Significantly Over The Last Year
Number Of Earnings Calls Mentioning Company
Culture, 2002 - 2017
+32% Key Findings
Q1 148* Compared to 2016, there has
Q2 been a 32 percent increase in
the number of earnings calls
Q3
112 mentioning issues related to
Q4 98 99 company culture, inclusion, and
89 diversity.
At 22 percent of mentions in
63 65 67 66
2017, information technology
56 56 54 59
48 was the largest sector
mentioning company culture,
21 diversity, and inclusion,
8 followed by consumer
discretionary with 21 percent of
mentions.
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Source: Bloomberg Terminal, HPS Search terms: "diversity and inclusion" (and iterations thereof), "corporate social
12
*Mentions through Nov. 26, 2017 responsibility," "best place(s) to work," "company culture," and "harassment"
SPECIAL TOPICS TECH'S BIG FIVE

Discussions Of Amazon Rose Steadily Over Past

Decade And Then Skyrocketed In 2017
Number Of Earnings Calls Mentioning Top Five Tech Companies, 2007 - 2017

1,400
1,300
Number Of Calls Mentioning Company

1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017*
Source: Bloomberg Terminal, HPS
*2017 is annualized as of December 1st, 2017 13
SPECIAL TOPICS ANDROID VERSUS IOS

Mentions Of Android And iOS Have Fallen Significantly

Since 2014
Takeaways
Number Of Earnings Calls Mentioning iOS And
Android Despite Android accounting for 63
percent of U.S. smartphone
400 operating system sales, mentions
of Android and iOS have remained
350 similar since 2013.
300 Since 2014, mentions of both
250 Android and iOS have declined in
Count

earnings calls by 36.8 and 36.5

200 percent, respectively.
150 While mentions of iOS continued a
slight decline, Android mentions
100 have increased 13.8 percent year-
50 over-year in 2017.
0 The uptick in Android mentions
2008 2010 2012 2014 2016 2018 over the past year has coincided
with the launch of its new
operating system.

Source: Bloomberg Terminal, TechCrunch 14

SPECIAL TOPICS VIRTUAL AND AUGMENTED REALITY

Following A Spike In 2016, Mentions Of Virtual Reality

And Augmented Reality Leveled Off In 2017
Total Earnings Calls Mentioning Virtual Or Mention Trend Of Virtual Or Augmented Reality
Augmented Reality In Select Industries
230 Information
194 Technology

Consumer
73 Discretionary

18 Financials

2014 2015 2016 2017 2014 2015 2016 2017

Sector Examples From Q2 2016 Transcripts To Q2 2017 Transcripts

VR is gaining steam Still very early in VR and AR
1 million Oculus users No one wears VR gear in public

Rolling out ability to upload Launched "Virtually There"

VR content to USA Today weekly show

Mentions VR company in VR not going online as

portfolio most previously thought

Source: Bloomberg Terminal, HPS 15

METHODOLOGY

Methodology
Our analysis examined earnings call transcripts to determine the quantity
of earnings calls mentioning key topics and sub-topics. The transcripts we
examined roughly corresponded to a given quarter. To conduct our
analysis, we:
Reviewed roughly 3,000 earnings call transcripts of U.S. domiciled
companies per quarter.
Earnings calls analyzed for Q3 2017 were held between October 1,
2017 November 26, 2017 (3,021 total calls).
Earnings calls analyzed for Q2 2017 were held between July 1, 2017
August 23, 2017 (3,117 total calls).
Earnings calls analyzed for Q1 2017 were held between April 1, 2017
May 31, 2017 (3,217 total calls).
Earnings calls analyzed for Q4 2016 were held between January 1,
2017 February 28, 2017 (2,956 total calls).

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Glossary

Energy Sector: The Energy Sector comprises companies engaged in exploration & production,
refining & marketing, and storage & transportation of oil & gas and coal & consumable fuels. It also
includes companies that offer oil & gas equipment and services.
Materials Sector: The Materials Sector includes companies that manufacture chemicals,
construction materials, glass, paper, forest products and related packaging products, and metals,
minerals and mining companies, including producers of steel.
Industrials Sector: The Industrials Sector includes manufacturers and distributors of capital goods
such as aerospace & defense, building products, electrical equipment and machinery and
companies that offer construction & engineering services. It also includes providers of commercial &
professional services including printing, environmental and facilities services, office services &
supplies, security & alarm services, human resource & employment services, research & consulting
services. It also includes companies that provide transportation services.
Consumer Discretionary Sector: The Consumer Discretionary Sector encompasses those
businesses that tend to be the most sensitive to economic cycles. Its manufacturing segment
includes automotive, household durable goods, leisure equipment and textiles & apparel. The
services segment includes hotels, restaurants and other leisure facilities, media production and
services, and consumer retailing and services.
Consumer Staples Sector: The Consumer Staples Sector comprises companies whose
businesses are less sensitive to economic cycles. It includes manufacturers and distributors of food,
beverages and tobacco and producers of non-durable household goods and personal products. It
also includes food & drug retailing companies as well as hypermarkets and consumer super centers.

Source: MSCI GICS Sector Classification 17

Glossary Cont.

Health Care Sector: The Health Care Sector includes health care providers & services, companies
that manufacture and distribute health care equipment & supplies, and health care technology
companies. It also includes companies involved in the research, development, production and
marketing of pharmaceuticals and biotechnology products.
Financials Sector: The Financials Sector contains companies involved in banking, thrifts & mortgage
finance, specialized finance, consumer finance, asset management and custody banks, investment
banking and brokerage and insurance. It also includes Financial Exchanges & Data and Mortgage
REITs.
Information Technology Sector: The Information Technology Sector comprises companies that offer
software and information technology services, manufacturers and distributors of technology hardware
& equipment such as communications equipment, cellular phones, computers & peripherals, electronic
equipment and related instruments, and semiconductors.
Telecommunication Services Sector: The Telecommunication Services Sector contains companies
that provide communications services primarily through a fixed-line, cellular or wireless, high
bandwidth and/or fiber optic cable network.
Utilities Sector: The Utilities Sector comprises utility companies such as electric, gas and water
utilities. It also includes independent power producers & energy traders and companies that engage in
generation and distribution of electricity using renewable sources.
Real Estate Sector: The Real Estate Sector contains companies engaged in real estate development
and operation. It also includes companies offering real estate related services and Equity Real Estate
Investment Trusts (REITs).

Source: MSCI GICS Sector Classification 18