Six tips for better earnings calls
Death, taxes and the earnings call: three inevitabilities of life for IR professionals. While IR Magazine can’t help you much with the first two, our recent webinar on optimizing the earnings call provided plenty of interesting takeaways on the last one.
How far in advance should you start preparing for the next earnings call? How can you be sure your key messages will resonate with the Street and be covered in the media? What do you do if a fire alarm goes off during the call? Here are six top tips from the webinar on how to improve your earnings call.
1. Do your research
At Zillow, the preparation for earnings starts right after the close of the previous quarter, when the IR team sends out an online survey to analysts and key people it has met with in the last year.
‘We ask them what topics they want covered, we track their sentiment on the company over time and typically throw in at least one other question we’re curious about,’ said Dennis Walsh, director of IR at Zillow, on the webinar. ‘It really helps us gather some feedback and see what the analysts want us to focus on.’ This information helps to inform the key messages that will make it into the next earnings call, he added.
2. Be flexible
‘Some management teams are willing to prepare for two weeks in advance of the call, and some companies won’t be able to commit that much time, so you have to work with what’s given to you,’ said Jean Lépine, senior vice president of communications and public affairs at DHX Media. He pointed out that acknowledging the reality of the time you will have to prepare is a key part of the IR team’s preparation.
Janet Craig, who has worked in senior IR positions at companies including Fortis and Loblaw, noted that ‘flexibility is key, but creating a cadence of meetings and times when you can actually address specific issues is vital to preparation’. Both Lépine and Craig agreed the best way to focus the minds of your management team is by developing the key messages early.
3. Collaboration is key
All three panelists advocated for a strong cross-functional working group to maximize the earnings call. ‘Some companies may get too focused on what a small community of analysts is saying, rather than working across communications channels to tell the company story,’ Lepine said.
At Zillow, the IR team works with the internal PR team to anticipate how the media will interpret the earnings call. ‘We really try to think about the headlines that will come from the key messages and predict how the analysts and media will consume the key messages,’ Walsh said. ‘It’s really helpful to have a good PR team that can help think about the story and how we want it to be told.’
4. Embrace new technology…
Zillow recently experimented with Slido, an audience interaction tool the company had been using for its internal company meetings. The IR team had been looking for ways to encourage the buy side to submit questions during the earnings call and, having experimented with taking questions via Facebook and Twitter, was looking for a new platform. Slido provides the opportunity for audience members to anonymously submit questions and allows other people in the audience to vote on which questions they’re most interested in.
‘With Slido we can take about 20-30 good, thoughtful questions from analysts who have been doing work on the company,’ explained Walsh. ‘Based on the votes from the audience, we typically get to the top 10 and know we’re answering questions the audience is interested in.’
5. …but be prepared for technology glitches
‘Many of us have counseled or guided our executive teams through the use of more technology and in many cases it makes it more efficient to tell the story, but inevitably there will be glitches,’ Lepine conceded. ‘These things will happen and you need to prepare your executive team to stay calm during the storm.’
During her time at Loblaw, Craig once participated in an earnings call struck down by a confluence of nightmarish issues. First the conference call line started to cut out during an analyst question, then the building’s fire alarm went off. Then someone fired up a leaf-blower right outside the chairman’s office. ‘Imagine the chief legal officer running down the stairs to ask them to shut it off,’ Craig said.
She was pleasantly surprised after the call that the analysts she spoke to understood that these issues were out of the company’s control. ‘What we sometimes feel are massive issues internally, the Street takes much more in its stride than you’d think,’ she said. ‘Keep calm during the crisis, figure out how to solve what you can solve and then just carry on.’
6. Measure success
Our panelists agreed that it’s important to think about measuring success both internally, in terms of how well prepared the management team was, and externally, in terms of how well the key messages were received.
At Zillow, the IR team actively assesses how well it has prepared while on the call. ‘During the call, we go through and mark off the questions that were addressed and that we’d prepared for, but also the questions we didn’t expect,’ Walsh said. ‘There are always going to be questions that come out of left field, but we’re looking for anything we really should have prepared an answer for.’
Craig also looks closely at the questions that come in but, to judge the effectiveness of the call externally, she looks at what the analysts are saying. ‘Typically I have three to five things I want the analysts notes to say and I want those to come out clearly,’ she said. ‘If I know everyone is singing from the same song sheet, that’s how I measure success.’
Click here to listen to the full IR Magazine Webinar – From revenue to recognition, sponsored by Intelligize