Executives who are both passionate and informed can talk about their companies in great detail and at great length. There are certainly times when elaborate and extended presentations are appropriate. The earnings-day conference call, however, is not one of them.
Last week, we offered some tips on preparing for your earnings calls. Now here are three tips to help you execute an efficient and effective conference call while maintaining proper etiquette.
The day you report earnings is obviously crucial, and even veteran IR professionals frequently botch them — sometimes due to poor preparation or just nerves. This week and next, we’ll offer tips to help you de-stress the event and execute it flawlessly — beginning today with four pre-call tips to help you get ready.
Nobody likes being the bearer of bad news. I remember as a kid breaking a basement window playing hockey and “forgetting” to tell my parents what happened.
Well, after a few feet of new snow, a lot of which accumulated in our basement, my secret was out. I remember my parents being furious, not so much for the broken glass itself, but more because I didn’t take responsibility for what happened. They made me feel terrible by saying what I didn’t tell them violates a trust that is difficult to earn back.
When I started working in investor relations (IR) more than 25 years ago, little did I realize that “creative writing” would often boil down to finding clever synonyms for words like opportunity, growth, and transition — rather than drafting colorful, superlative-rich descriptions of corporate events and milestones. Is it possible to find a new way to express year-over-year financial comparisons or do the numbers in the financial tables mostly speak for themselves?
We are often faced with management teams that seek to fill their perceived “air time” and make their conference call stand out from the hundreds of other calls taking place. If this sounds familiar, and you find yourself wondering how much creative leeway to take with your own quarterly earnings calls, then keep reading as I explain where it’s possible to truly add value, and where it actually detracts from your objective.
Even great companies with excellent management teams will face the inevitable challenge of having to communicate bad news to Wall Street. In a previous blog post, my colleague Tom McDonald discussed how to handle missing a quarter, but what about other results that can have a material impact on your business in the future?
In the healthcare industry, a number of things can go awry — a clinical trial that doesn’t meet your primary endpoint, a setback in your product’s regulatory approval process, a change in reimbursement policy, or a delay in your product launch date due to a manufacturing issue. Effectively communicating these scenarios with the Street can mitigate adverse reactions to your company’s reputation — and to your share price.
A “miss” relative to a company’s financial guidance can happen to even the best management teams. Misses can arise from a hiccup in company operations or they can be related to factors outside your company’s control. In either case, the ways in which you assess the problem, communicate it, and follow up in later quarters will have a powerful and lasting impact on the Street’s views of management’s credibility and thus your stock’s long-term valuation.
Assessing the problem
Before you communicate with the Street, make sure you’ve honestly assessed the reason for the miss and its ongoing impact to your results. Was this merely a soft quarter for seasonal or other factors, or was there a one-time event? While it’s possible that ongoing results won’t be impacted, it’s also possible that greater forces are at play: a business segment could be maturing, or your internal growth expectations may have to be moderated. Even if the miss is truly related to an issue out of your control, such as a reimbursement change, make sure you critically evaluate the impact before you communicate any revised guidance.