March 31, 2015
Quarterly earnings calls should be a win-win for everyone. Companies get to deliver their messages to a relatively captive investor audience, while investors get direct access to the senior management team and immediate answers to their questions. And yet, it’s common for both parties to feel disappointed and even frustrated at the end of the call. Management may feel the questioners focused too much on short-term or technical issues and not enough on long-term strategies, while investors might complain that the company didn’t provide any new or useful information beyond what was already in the release.
As with most communications, content is king. For quarterly earnings calls, higher-quality content in the prepared remarks can lead to a richer subsequent discussion during the Q&A.
Here are our top Do’s and Don’ts to improve the effectiveness of your quarterly earnings calls.
1) Keep your conference call focused on strategy.
Focus not only on what drove your current results, but also the strengths that position your company for future results. Prepare to discuss what you are seeing across the industry as well as internally and the impact these trends have on your strategy and performance.
2) Keep it impactful but brief.
Usually, 15 to 20 minutes of prepared remarks are enough, as you want to leave time for a productive Q&A session. To reduce time spent on simply reciting the financials, consider posting commentary from your CFO ahead of your call so your prepared remarks can concentrate more on strategic messaging.
3) Remember you are telling a story.
Each quarterly earnings call should serve as a new chapter in an ongoing story. Investors are always looking for additional perspective and color to provide insight on the company’s progress and growth potential.
4) Make sure you have the last word.
Regardless of where the Q&A discussion might lead, the company always has the opportunity for the last word. Prepare brief closing remarks that allow you to reinforce your core takeaways and re-establish your expectations going forward.
5) Remember that tone matters.
Be enthusiastic, confident, cordial and responsive. In Winning Investors Over: Surprising Truths About Honesty, Earnings Guidance, and Other Ways to Boost Your Stock Price, Baruch Lev talks about the importance of conference calls and shares proof that they do matter. His research revealed that earnings and book values (net assets) — account for no more than 10 percent of stock price changes that occur around the time financial reports are released. Therefore, what you say on the call, how you say it and the quality of the information all have an important impact on investor reaction and trading.
6) Practice with an inside audience.
A formal dry-run of the earnings call – including a small audience of internal and external advisors on a private dial-in number – will allow you to test your core messages and command of the issues, and prepare for the anticipated tough questions.
7) Follow up after the call.
Take the time to do a brief “exit poll” with investors who were on the call but did not ask questions – or even those who were unexpectedly not on the call – to determine how well your message was received and identify any misperceptions that need to be addressed.
1) Assume you know what investors think.
An “audit” of your financial audience at the end of each quarter by polling a handful of investors can keep you in touch with what’s on their minds and help give you a clear understanding of what might come up on the next call. If nothing else, you create additional goodwill going into the call by asking for input.
2) Avoid the “elephants in the room.”
Issues that are top-of-mind with investors should be addressed directly in your opening remarks. Doing so will enhance your credibility and ensure that the audience hears your messages – and may even help deflect difficult questions during the subsequent Q&A session.
3) Repeat the release verbatim.
Simply rehashing what’s in the release will prompt some of the loudest complaints from investors. Instead, focus your prepared remarks on the three or four core takeaways from the quarter and how they relate to your progress against stated goals. And, whether you read from a script or use talking points, be sure it sounds like you’re saying it and not reading it.
4) Ignore technical problems that may occur during the call.
Audio interference or inadvertently being dropped from a call are among the many technical issues that can cause frustration for the listener. Ultimately, it is the company’s responsibility to ensure that the call runs smoothly.
5) Sprint to the finish line.
It is very common for executives to read prepared remarks faster than normal due to nerves or wanting to get to the more interactive portion of the call. Take a deep breath, pause and read slowly – it will be easier for listeners to absorb your comments.
6) Allow awkward silences to linger.
Remember that you are engaging in a dialogue. Be sure to greet participants by name and acknowledge any congratulatory remarks. Also, rather than struggling to answer an unanticipated question, it is acceptable to say, “We don’t have that information at our finger tips and we’ll get back to you after the call today.”
Quarterly earnings conference calls remain a vital cog in investors’ due diligence machine. By enhancing what you put into them, you can dramatically improve what you get out of them.
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