Thirty tips for better earnings calls
Set the date and time (and make sure people show up)
In beginnings are the seeds of endings. The number one meta-tip? ‘It’s all about planning,’ says Jill Taylor, group marketing manager of conferencing and collaboration services at Verizon Business. The logistics of gathering a list of invitees, assembling content and liaising with a conferencing provider to ensure all the details have been taken care of should be planned well in advance of the event to ensure everything runs smoothly.
‘Two weeks’ notice is about the minimum for getting things into people’s diaries,’ Taylor adds. ‘Then perhaps a reminder a week before and another a day before.’ In North America, initial advisories usually go out seven to 10 days in advance. ‘Much more than that and people will forget,’ says one market participant. Personal reminders to key attendees are valued wherever you are.
Be mindful of when your peers are announcing. ‘People tend to take their cue from the industry leader,’ says Gene Marbach, group vice president of IR at New York-based Makovsky & Co, an IR consulting firm. ‘The leader will take whatever spot it chooses; you want to avoid conflicts as everybody else lines up. That just annoys analysts and they may end up sending a junior associate your way.’
‘There’s value to having some consistency in when you report,’ remarks Ina McGuinness, senior vice president at financial communications consultancy ICR. ‘A regular date and established routine gives everyone a sense of flow and rhythm to the process that doesn’t have to be revisited every quarter.’
Set up the infrastructure
Choose your conferencing provider carefully. ‘It’s a high-churn situation for providers that don’t do an excellent job on IR calls,’ says Gary Iles, senior director of strategy and product management at ACT Conferencing. Earnings season is crunch time for IROs; economic conditions have made CEOs crankier and IR job prospects shakier, while conferencing providers are ramping up high-touch IR services.
Some say using the same vendor for multiple services helps reduce error. ‘The more you have to patch together different vendors, technologies and equipment, the more chance for problems,’ says Hala Elsherbini, senior vice president and COO at consulting firm Halliburton IR.
Push for perfection, says Don Darragh, channel manager at Chorus Call:
- Bullet-proof connections to conferencing bridge
- Clear and intelligible sound
- Easy and quick access to the correct call for all callers
- Professional conference specialists with extensive training
- Enhancements like digital recording, web-based call management and call transcripts.
‘If all these pieces are well managed, the IRO can concentrate on content and delivery,’ adds Ken Gesund, senior vice president at MessageBank.
Pressure your provider to recruit and retain good people. Find out about their career path and seniority within the company. For high-level calls, operators recruited from the ranks of professional communicators naturally make for broadcast quality.
Seconds before start time, an operator who can coolly juggle an onslaught of calls comes in handy. Then you can be active during the Q&A, prioritizing calls in real time and dumping any recognized hucksters. It’s rare, but last year a slew of firms from Molson Coors to PepsiCo got stung by a serial analyst impersonator.
‘Get the phone-in numbers well before your boss tells you to send out invitations,’ says Anne Lhuillier, Paris-based European IR event sales manager for Arkadin Global Conferencing. ‘Whatever else changes, those numbers won’t – and being a little proactive cuts a lot of stress.’
Write the press release
NIRI, the SEC and everyone else wants you to keep a balanced perspective, discussing both positive and negative influences on performance. Analysts will see through any ‘glossification’ effort. Your headline will almost always be GAAP and/or pro forma EPS.
In these uncertain times, more and more firms have ceased quarterly guidance in favor of other metrics. Those that continue tend to be small caps seeking analyst attention. The US Chamber of Commerce thinks things would be better if companies got investors focused on long-term growth.
Don’t provide earnings guidance unless you can do so with a reasonable degree of certainty and accuracy. ‘The biggest joker in the deck is the economy,’ Marbach points out. ‘If you give inaccurate guidance, you’ll have to redo it, which will cost you credibility with the investment community.’
Write the script
Your messaging will be guided by analyst research and advanced stakeholder polling. Hit the high points and don’t just regurgitate every line of the press release. ‘People can read and don’t need a history lesson,’ is a common refrain among listeners. Don’t forget the key question of any earnings call is whether the leadership is on top of the current situation and has a plan to deal with it. Sound enthusiastic: try a few words from the CFO and bring in a head of department from time to time.
Your script should give color on the important business drivers and how the current period meshes with your long-term themes and strategy. Find another home for any material that doesn’t fit that bill. ‘Analysts appreciate a concise commentary,’ explains Kathleen Bela, vice president of IR at Sunnyvale, California-based Juniper Networks.
‘We’ve shortened our prepared remarks by up to 50 percent over the last year and it has been extremely well received.’
Don’t wait for the final numbers before you start drafting a script and press release. ‘If you’ve agreed the key messages, it doesn’t matter if those numbers get dropped the night before the call,’ says McGuinness. She also advises limiting the brainstorming session: ‘Ensure your strategic vision is covered. Everything else is tactics. A small team can focus on the firm’s thematic progression without getting bogged down by numbers.’
Curb your enthusiasm. ‘Speakers should avoid excessive exuberance,’ suggests New York-based media trainer Virgil Scudder, president of Virgil Scudder & Associates. ‘Don’t say ‘mission accomplished’ when you really mean ‘we’re making progress’. A CEO needs to be a cheerleader, but a tempered one.’
The Q&A is the highlight of the show. It’s critical to approach it well rehearsed; you never know when that inquisitorial grenade might be tossed. Several methods can help anticipate questions: you can, for example, scope out competitors’ calls to get a sense of current investor/analyst questions about the industry. You can put on your analyst’s hat and try to imagine what they would ask. Or you can simply ask them in one-on-one phone calls and emails. Some IROs use reminder phone calls to find out about the issues analysts would like to hear discussed.
Now you can shape management’s prepared remarks and anticipate queries. Write up the questions and the answers. Understand how your chief executive wants to operate: some prefer everything scripted out, others can work with bullets.
Keep your Q&A prep document to two pages. While making the effort to produce a 30-question document may have value, don’t expect your CEO to read it – and don’t allow him or her to speculate without all the facts.
Schedule and host a rehearsal. Get staffers to play the role of analysts asking questions and insist everyone takes it seriously. Make sure executives participating on the call speak slowly and don’t sound like they’re reading.
‘The amount of time management devotes to preparation is directly proportionate to the quality of the call,’ says Bob Blair, president of Blair_IR, a New York-based IR consulting firm. ‘Plenty of advance planning is absolutely critical.’
Jeff Majtyka, managing director of New York-based Brainerd Communicators, says the key is to get management engaged in message development. ‘It’s a challenge for some IROs,’ he says. ‘Plenty of firms can handle the logistics; getting CEO buy-in is harder.’
Majtyka says rehearsals can help engage management. ‘When CEOs hear it coming out of their own mouth, they become more engaged with the content,’ he says. The best time to do a Q&A prep is right before the call. ‘It makes your CEO more likely to remember key messages,’ Majtyka adds.
Both the scripted and Q&A portions should be rehearsed, recorded and listened to. ‘The steps to better delivery and better Q&A responses become more apparent when you listen to the playback,’ points out Scudder.
Prepare a slide deck... or not
More and more companies are clarifying their messages with concise slide presentations. Slides are especially handy when a technical description of complex or multiple product lines risks befuddling a non-science crowd.
Some argue that for a typical earnings call, slides merely clutter an analyst’s desk as he or she pays attention to the earnings release along with his or her own data.
Some firms have started uploading their slide deck to a social content network like SlideShare, then embedding it in their IR website.
Slides also come in useful throughout the quarter. ‘When I do one-on-ones with investors, I often go back to the slides,’ says Bela. ‘In addition, they are great reference points the following day when I’m deluged with calls.’
Bela is also investigating social media like Twitter and podcasting to supplement her message. ‘Twitter is a great opt-in resource for investors that want to ensure they get news of what I consider a high-impact press release,’ she explains. ‘Podcasting is simple to do and convenient for analysts who can listen to the call on their MP3 player while at the gym or on a plane.’
Make follow-up calls
Alright – so how did you do? Find out with some post-call polling. While you’re at it, do a post-mortem looking for ways to improve the process you’ll be recommencing in a few short weeks.
Scudder recounts a story about a newly minted company leader thrust into the earnings call arena. Faced with questions he was unprepared for, the new guy adopted a strikingly combative position, declining to address questions on topics he himself had brought up in the script.
But it got worse. As the call ended, the CEO, thinking the mics were off, snapped to his IRO, ‘Let’s get the f*** out of here!’ The lesson according to Scudder, is: ‘Don’t swear until you are outside the building.’