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The Shutdown: View From The C Suite

|Includes: Alaska Air Group, Inc. (ALK), ANIX, APH, CTXS, DCOM, DFS, PTC, TXT

Shutdown: View From The C Suite

We're all here for investment research and analysis, and most of us would probably prefer to keep politics separate. But the government shutdown is dominating headlines on Bloomberg, The Wall Street Journal, and even the Financial Times across the pond, so we'll do a quick temperature check via Seeking Alpha's recent conference call transcripts to see what corporate America is thinking.

As you might expect, CEOs of companies with specific regulatory exposure have more to say about the shutdown than others. Transportation, defense, and pharmaceuticals seem like industries more likely to have the shutdown on their radar. Financial services companies doing regulated deals from SBA loans to IPOs are also keeping an eye out.

Aircraft/Transportation

Brad Tilden, CEO of $8.11 billion market cap airline Alaska Air Group (ALK):

As far as government shutdown goes per say, we have not seen any material impact at all to date as it relates to fares and travel although down the road and if Ben wants to comment that, if this continues there will be some real challenges operationally.

Ben Minicucci (Alaska Chief Operating Officer)

Andrew it’s exactly that. Everyone across the country is seeing some challenges along the TSA front and we're just hopeful this thing gets solved soon and things get back on track.

Scott Donnelly, CEO of $12.61 billion market cap aircraft and defense firm Textron (TXT):

So we -- on the document front, which is really where we are on Longitude and have been for a while, the teams continue to do their work. The good news is that virtually all those documents are delegated to us, so that work is continuing unimpeded by the FAA guys not being in. When we finish all that, which is not too far down the line here, obviously, FAA has to issue that final type certification. And that is something -- I mean, we're obviously, we're not delegated to do that. So I would say in the next month, no, it doesn't have an effect on us. But we will reach a point here where we will need the FAA to issue the type certification.

This exchange also looks noteworthy:

Pete Skibitski

And then the first quarter, if we -- the shutdown continues and you don't get the full cert in the first quarter, do you expect to book any revenue there just on title transfer?

Scott Donnelly

No, no. If we're not able to get the final cert, we wouldn't be able to do that.

Financial Services

Roger Hochschild, CEO of $22 billion market cap credit services firm Discover Financial Services (DFS):

On the subject of how we treat our customers, I want to take a minute to acknowledge the difficult financial situation now faced by furloughed government employees. To support customers in that situation, we are providing payment holidays to those that ask for flexibility at this time. Overall credit performance continues to stabilize. The impact of normalization is diminishing and we are experiencing tangible benefits from enhancements to our underwriting and collection strategies.

Kenneth Mahon, CEO of $678 million market cap bank holding company Dime Community Bancshares (DCOM):

Finally, in fee income, while 2018 was a slow year for us in the SBA business, we did receive PLP status and hope to grow the business line in 2019. Recognizing the SBA  shutdown right now, that could put a crimp or at least slow progress down.

Greg Becker, CEO of $12 billion market cap financial and bank holding company SVB Financial group (SIVB)

With SVB Leerink, we expect core fee income growth in the high-60s. This reflects our expectations of slow investment banking revenues in the first quarter due to the impact of the government shutdown on the SEC IPO review process.

Mike Descheneaux, president of Silicon Valley bank also commented:

So but again I think when you add all these things together we’re feeling pretty good going into it. But when you think about the things to watch obviously with the government shutdown, something we’re keeping a very, very close eye on with the IPO market being shut down, as you can imagine we do get a healthy amount of funding coming from IPO. 

Information Technology

David Henshall, CEO of $14 billion market cap workplace IT solutions provider Citrix (CTXS), responding to an analyst question about macro conditions:

I think noise is a right way to put it. I mean, it is a headwind. So if you look at it specifically, we've been a public sector business, state and local or much larger parts for Citrix than federal. But I think it's reasonable to assume that there's going to be some broader impact at some point. I mean, I can't point to it quantitatively.

But qualitatively, there's conversations that everyone's having, just trying to understand the potential impact on their business, whether it's from U.S. shutdown, whether it's from global changes with Brexit or whether it's things like ongoing political volatility.

So there is conversations out there, but we're anticipating that conditions in ‘19 are roughly similar to what we saw in Q4 time frame when this was already a pretty hot topic.

Jim Heppelmann, CEO of $10 billion market cap product management software company PTC Inc. (PTC)

Bookings of $101 million was within our guidance range albeit toward the lower end. We had nine larger subscription deals in the Americas and EMEA that pushed out of Q1 including a strategic IoT mega deal in Europe and altogether these deals totaled over $20 million. This includes around $2 million in larger U.S. government deals [that] slip because of the government shutdown that began on December 22nd simply because there was nobody there to process the deals.

[...] I think from our perspective, there's not a lot of specific caution, there's not a lot of specific issues, it's just we read the newspapers like everybody else does and it just feels a little reckless at this point given the stuff happening out there PMI is coming down and so forth, it feels reckless to take guidance up.

Richard Norwitt, CEO of $25 billion market cap Amphenol (APH), which sells cable systems, antennas, and sensors.

The one area that [the shutdown] doesn't seem to have an impact on is the defense industry. [...] We continue to see very robust demand in the military market. Obviously, we don't sell directly to the government in the vast majority of instances. [...] But I think, in general, we have not seen really any slowdown or any impact from the government shutdown on our really strong military business.

Biopharma

Amit Kumar, CEO of $95 million market cap Anixa Biosciences (ANIX):

When we met with the FDA we were told by officials that the final meeting minutes would be approved and sent to us in about a month unless there was a government shutdown. At that time none of us expected an extended shutdown.

We had hoped to have the meeting minutes in hand for review well before this conference call. I just received the minutes about an hour ago, I was notified and the official minutes are as we expected.

Based on the discussions had at the meeting, as well as some very recent discussions we've had with potential partners, we feel that we can launch the Cchek prostate cancer test this year in the third calendar quarter of 2019.

See other interesting shutdown related MD&A? Share them below.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am long ERUS, EWZ, JNK, PSQ, and TUR.