Your earnings call represents the largest audience of investors, research analysts and other key stakeholders you will have all quarter, so smart IROs take full advantage of the opportunity to use it as a strategic communication tool that goes beyond just highlighting quarterly results.
Hone your message
Strategic communication is one of the ways IROs distinguish their company in a world where capital is becoming increasingly scarce. A corporate narrative that is simple, differentiated and memorable can answer the question: ‘Why should I care?’ The same principles should be applied to your earnings call messaging.
The introduction should focus on a high-level update of the business and take time to remind investors of the company’s overarching goals as well as the strategy management has laid out to achieve those goals. It is not only okay but also good practice to reiterate these goals each quarter as you inculcate the Street. When companies do this well, their investors should be able to easily understand the strategy, vision and goals. It is also a good opportunity to talk about how the company is positioned in current market conditions and the most important KPIs for the business. Highlighting detailed results should be kept to a minimum.
The core of the earnings call should be spent discussing the details of your quarterly results including context for how the firm’s performance during the quarter aligned with its strategy. In considering how to craft a narrative around quarterly results, IROs should start with the questions: what are the most important things for investors to take from the quarter and what do I want the analysts to write about? Once you have settled on two to four key takeaways, underscore those up front and throughout the discussion.
The conclusion of the call is an opportunity to reiterate the key takeaways and provide commentary on business outlook and, potentially, guidance. Given current market conditions, it is fair to convey that there could be challenging times ahead but, if appropriate, leave investors with a sense of optimism.
Prepare for Q&A
For many investors, Q&A is the most engaging part of the earnings call and, for many IROs, it presents the challenging portion to control the narrative. Seasoned IROs see this as an opportunity to showcase their value to management by ensuring the team is well prepared for whatever questions may arise.
One of the ways IROs can anticipate questions is to put themselves in the shoes of their investors and analysts. First, critically analyze the company’s financial statements and business results to find the questions investors and analysts may bring up. Working closely with accounting, finance and other relevant teams can gather more perspectives to bring these questions to the surface.
Further, having spent the prior two months of the quarter engaging with investors through conferences, non-deal roadshows and one-on-one conversations, clear themes as well as common questions and concerns typically emerge. In addition, take the time to tune in to peer earnings calls to see what questions come up, especially if those peers are covered by the same analysts, who often ask similar thematic questions.
Armed with a list of questions, you can then draft responses, collect feedback and host a mock Q&A session with management to ensure readiness.
Drive audience engagement
The fact that you are announcing earnings will naturally get you some audience, but every IRO’s goal should also include growing this audience so you can deliver the company’s narrative to the broadest set of current and prospective shareholders.
One of the most direct ways to grow your audience is to make the earnings calls useful and engaging. Why should someone tune in rather than just read the earnings release or the analyst notes? As such, the call shouldn’t just regurgitate the information in the earnings release. Rather the objective should be to provide context and color around the results in the press release.
North American investors are the most likely to listen live to the recording or read the transcript, according to the IR Magazine Earnings Calls report. Asian investors are the most likely to read the analyst notes. The buy side is more likely to listen to the recording or read the transcript or analyst notes than the sell side, which is more likely to listen live.
Earnings calls are evolving. More companies are creating slides with graphics and charts to accompany the earnings call while others are starting to explore video-based calls or inviting analysts to host fire-side chats. Ask your investors and research analysts for feedback on ways the call can be more useful. Each of these ideas offers an opportunity to increase engagement with your audience, but also needs to be carefully considered because each comes with its own unique set of challenges and risks.
Jason Fooks is senior vice president of investor relations and marketing at iStar and Safehold