Earnings Calls: The 4 Most Common Mistakes
Thousands of public companies have just released their quarterly earnings and held those dreaded earnings calls — far more dreaded for those whose numbers missed estimates. While they’re not much fun for anyone, it can’t be overstated how important earnings calls are for your reputation as a leader and for the prospects for your stock.
The call is your chance to communicate your story to the world, to put your perspective formally into the public record. And it’s your investors’ and analysts’ chance to seek clues about your future prospects. In short, the call is something you just can’t afford to mess up.
So what are the most common mistakes companies make with their earnings calls? Here are my top four:
- Going In Blind. Executives who walk into the earnings call without a clear understanding of what they’re confronting are going to get blindsided by tough questions they’re unprepared to answer. Having a disappointing quarter is bad. But failing to deliver a reasonable accounting of why you missed your numbers and a confident-yet-plausible assessment of how you’ll meet them going forward is potentially catastrophic. Yet regardless your financial performance, it’s imperative to anticipate the concerns of your analysts and investors, and to understand what they expect to hear on the call.We’ve recommended a detailed five-week process for preparing for each and every earnings call, and our clients who follow our recommendations inevitably have much more successful calls. At a minimum, do the following in advance of your next call:
Rehearse your performance. Conduct a live read-through of your prepared remarks in front of colleagues who are willing and able to be candid. You and they can hear how you sound, and opportunities to tighten your message will likely present themselves.
Prep very carefully for Q&A. Do notjust “wing it.” Instead, create a list of the toughest questions you think your analysts will ask on the call and script strategic answers. Prior to the call decide which member of the management team will answer each type of question. This way there won’t be any awkward silences as you decide who will take on that particularly tough question.
- Focusing Too Much on the Past. Yes, you need to detail the results of your quarter. But your earnings press release contains most of the pertinent information on that subject. Your best approach is to reiterate the key highlights, then pivot to a visionary assessment of your company’s future, focusing on key upcoming milestones and anticipated growth catalysts. Remember that every communication with your investment community is an opportunity to deepen your relationship, generate trust, and create goodwill that might lead to further investment down the line.
- Trying to Gloss Over Negatives. Like a child who hopes you won’t notice her disappointing report card, trying to evade discussion of, or responsibility for, negative events will earn you nothing but diminished respect from your investors and analysts. These folks are very smart professionals and it’s their job to take note of all the relevant events affecting your company’s performance. You’ll only antagonize them if they believe you’re trying to make that job harder with sleights of hand. However, if you own up to your setbacks and confront them forthrightly, you’ll deepen their respect for you (provided that such setbacks are rare, of course).
- Making the Call Too Long. Brevity is the soul of wit, and in today’s hyper-busy world, an earnings call delivered concisely is deeply appreciated by those on the other end of the line. More important, concision builds clarity and helps you convey your key themes more powerfully. Finally, the more time you spend on your prepared remarks, the less time you typically have for Q & A, and that will annoy your audience.
A poorly delivered earnings call can do almost as much damage to your credibility as a missed quarter — and having both at the same time can be difficult to recover from. The best defense is a well-crafted message, carefully prepared and concisely delivered. Need help? Just reach out.
ICR Westwicke is the largest healthcare focused investor relations firm in the country. We provide customized investor relations programs and independent capital markets advice to small and mid-cap healthcare companies.
Leave a Reply