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May 19, 2020

Six trends from earnings season under Covid-19

IR consultants discuss how the pandemic has changed results announcements

The Covid-19 crisis has created some of the most difficult reporting conditions for many years, if not decades. Financial results and outlooks have been left in tatters by the pandemic. Highlighting the uncertainty, hundreds of companies have cut or suspended guidance since mid-March, according to an analysis by Intelligize conducted for IR Magazine

Adding to the complexity, stay-at-home rules have forced IR teams and senior management to rethink the standard earnings playbook. With speakers most likely calling in from home, companies have had to think of new ways to stay in contact behind the scenes and ensure the call goes off smoothly. 

In response to these challenges, companies have adapted the content, tone and format of their results statements and calls. Below, IR consultants discuss six trends they have seen during the past earnings season. 

1. Softer, more heartfelt statements
Given the current circumstances, corporate leaders have understandably focused less on market performance and more on their Covid-19 response. ‘While mitigating actions in most cases include cost cutting, the current crisis has provided an opportunity for leadership to show its human side and demonstrate genuine affection and respect for employees,’ says Sandra Novakov, head of IR at Citigate Dewe Rogerson, who is based in London. As an example, she points to the personal CEO message delivered by ABF, a Citigate client, in its interim results announcement.

2. Detailed scenario planning
Companies are also providing granular insights to investors and analysts to help them think about future performance. ‘In light of heightened uncertainty in the market, companies have an opportunity to demonstrate their knowledge of the sector and guide the market by sharing their internal analyses with their wider stakeholders,’ says Novakov. For example, she says some companies have included a stress test looking at different scenarios for sales, costs and cash flows.

3. Intra-quarter updates
Additional detail is key at times of crisis. Another way companies are responding to this need is with greater information from within the quarter. ‘IR officers and executives are providing month-by-month or even weekly breakdowns of performance,’ says Chicago-based Jeremy Cohen, senior vice president in investor relations at Edelman. ‘This is a direct result of the general economic uncertainty, and issuers are answering the call by leveling their transparency around intra-quarter performance.’

4. Pre-recorded comments 
With the earnings call teams scattered across different locations and relying on home technology, consultants have recommended the use of prerecorded statements. ‘I’m really pushing everyone to prerecord because I’m finding a lot of my executives do not have a landline,’ said Nicole Noutsios, founder of California-based NMN Advisors, speaking on an IR Magazine and Q4 webinar last month. ‘Do you have a second phone? Who’s going to contact you if your line drops? A lot of people are very reliant on cellphones and it could add some complexity to an earnings process that is already going to be challenging.’ 

5. Side video and text chats
Under normal circumstances, senior management and IR are in the same room during earnings, providing the opportunity to speak offline and deliver non-verbal cues. During this earnings season, companies are using technology to try to recreate this environment. Noutsios says it’s been useful for clients to run a videoconferencing service of their choice in the background on silent. ‘You can all see each other,’ she said on the webinar. ‘Make sure it’s on mute and then have a chat, so you can still talk if you’re all in different places.’

6. ESG getting more airtime 
Some thought ESG issues could be pushed aside by Covid-19. In fact, they have grown even more in importance. ‘The crisis is bringing ESG efforts even more into the spotlight as investors pay greater attention to business continuity efforts and how issuers are weathering the Covid-19 storm,’ says Cohen. ‘It is clear that a fuller discussion around ESG efforts and risk mitigation initiatives will be expected by investors as they seek out healthy businesses that can drive long-term value creation.’

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