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Best Practices for Earnings Call Preparation

Posted on November 14th, 2022. Posted by

Best Practices for Earnings Call Preparation

While every quarter is different, the “playbook” for preparing senior management for a successful earnings conference call is largely the same. Specifically, the best prepared CEOs and CFOs follow a set of key strategic and tactical steps designed to bring them through a review of all the essential elements pertinent to the investment community’s analysis of quarterly earnings. In short, CEOs and CFOs that have allocated adequate time to understanding the results, in the context of both internal and external expectations, and are capable of addressing all possible topics with ease and transparency, will succeed. Drafting the conference call script is just one piece of this important process. Below, we walk you through these best practices of an effective earnings call.

1. Establish a timeline of deliverables at the outset so all participants know what is expected of them and when.

  • Map out the mission-critical items, such as preparing the earnings press release and all the necessary financial tables and disclosures; the requisite SEC filings; the drafting of the conference call scripts and any supporting documents (e.g., slides); the creation of a Q&A document; and the dry-run.
  • Include administrative tasks such as arranging for the call itself, creating the queue order in which analysts will ask questions on the call, obtaining the proper pre-clearance of the press release with the Nasdaq or NYSE and so forth.
  • Be mindful of potential bottlenecks such as audit committee approval and legal review.

The importance of a timeline cannot be understated: it keeps the process moving smoothly and prevents important steps from slipping through the cracks.

2. Begin every earnings call preparation period with a thorough analysis of the results you will be reporting and consideration of the key messages you want to convey (the highlights as well as the lowlights.)

  • Evaluate results and identify notable performance outliers relative to expectations and/or guidance. These include revenues, margins and EPS, and other relevant metrics such as development milestones or the number of system installations.
  • Analyze both year-over-year and sequential trends. Remember that the Street largely regards results with a year-over-year lens so if sequential trends are important, be sure to provide context for that and clearly delineate between both metrics.
  • Determine how much detail you will disclose on a division or product line basis. Consistency is paramount – avoid the temptation to give a data point one quarter (especially if it’s good) and withhold it the next (especially if it’s bad).
  • Craft a definitive message on the over-arching theme of the quarter’s results. Keep in mind the “tone” of this take-away. Be straightforward, but also be wary of sugarcoating the results or being overly dour. Answer questions such as: All things considered, was this a good quarter especially in the face of internal and/or external challenges? Did the quarter admittedly fall short of internal expectations? Was this a solid quarter and one that bolsters your confidence in the rest of the year?

3. Be aware of the hot-button issues both for your company and for your industry sector(s). Assemble a document of expected questions.

  • Monitor Wall Street research throughout the quarter. Stay educated on the prominent topics and issues analysts and investors care about – so you can respond to these concerns. Competitive dynamics, healthcare policy changes, patient utilization trends, foreign currency impacts or tax changes are often highly topical so be prepared to address these questions.
  • Tune in to what your competitors are reporting and discussing, and especially what they are doing with guidance. If all of your peers are lowering guidance and you are raising yours, have a cogent explanation ready to support the higher projections. Likewise, if your perspectives on your sector differ from those of your competitors, by all means say so and be prepared to explain this divergence. Don’t be caught off guard; be ready.
  • Finally, compile the questions you expect to hear during the call Q&A, and in subsequent conversations with the Street.  Include questions from prior calls that may be pertinent again this quarter. Survey your sell-side analysts beforehand to learn what they are likely to ask. Prepare talking points, too, particularly for the tough questions. In short, limit both the likelihood for any surprise questions or botched answers on the call.

4. Conduct a thorough guidance “stress-testing” and vetting process as early in the preparation period as possible.

  • Ascertain what has changed that is causing you to adjust your internal budget projections and whether these changes are significant enough to merit a revision in guidance (if you in fact provide guidance.)
  • Determine how accurate you can be in your assessment of these factors given the dynamics of your market and consider the potential for variability when weighing a point estimate versus a range of estimates.
  • When revising guidance, bear in mind the mantra “under-promise and over-deliver.” Be certain your guidance builds in a reasonable – but not excessive – amount of cushion.
  • While you need to evaluate your guidance relative to current “consensus,” you should not consider where the Street’s numbers are when you set your guidance.  The only relevant consideration is what you can actually achieve in the quarter/year.
  • Vet and stress-test the new metrics you intend to provide. Drop the data into the type of models run by your analysts, not just into your internal models. Believe it or not, things often play differently so avoid providing the Street with data that doesn’t jive with the way they build their projections.
    • As with results, be able to explain the key variables affecting the guidance revisions. Is this somewhat transient in nature, e.g., a delayed shipment or a large one-time order? Or is this systemic, e.g., sustained price erosion or ongoing competitive share gains?

5. Draft the press release and call scripts in conjunction with one another to ensure consistent messaging, yet still allowing for enough differentiation so that the call is not merely a rehash of the press release.

  • The release should contain all of the relevant quantitative facts while the scripts can contain more of the “color commentary” – the qualitative granularity around what drove the figures cited in the release.
  • Use the CEO’s quote in the press release to set the tone that you will want to carry through the scripted comments.
  • Make sure all of the numbers in the release, slides and the scripts tie out to one another, especially the guidance.

6. Always allow adequate time to conduct a dry-run of the scripts and Q&A practice.

  • Schedule time before the call to read the scripts out loud to your team. This guards against redundant messaging and helps to capture the desired tone of the commentary. Familiarity with the script also greatly improves the speaker’s ability to sound more conversational on the live call while reading aloud.
  • Q&A prep is easily one of the most critical differentiators between a successful and an unsuccessful earnings call.  Skip this step at your peril!  Be sure to seek questions from your team that do not necessarily appear in the Q&A prep document to better prepare you for those out-of-left-field zingers, especially when the response requires delicate messaging.
  • Create a “cheat sheet” with the key numbers, trends and metrics so that you aren’t shuffling through tons of paper to find answers.

Engaging consistently in these core elements will provide a foundation for a strong track record of successful earnings conference calls. Get a complete roadmap for successful earnings calls. Download Effective Earnings Calls From Start to Finish today.  


Mike Piccinino

Mike Piccinino is a Managing Director on Westwicke's medical technology and diagnostics teams. He has extensive experience in the buy-side investment process. He has a BA from James Madison University.

View full bio   |   Other posts by Mike Piccinino, CFA

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