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.
Let’s be honest: Market conditions have been hostile to most industries this year, and the healthcare sectors have been victimized along with all the rest. These are not easy days to be the chief executive or chief financial officer of a public company, and you may be feeling pressure to take action to drive your share price up despite the headwinds.
It’s been several years since Wall Street last saw a period of sustained bearishness — long enough that some of today’s public companies have actually never been through such a difficult time. A lot of companies are hitting the panic button. We recommend the opposite.
I’ve written before on collaboration between the information “silos” that exist within some organizations and why it is important to establish — and stick to — an internal control process for issuing public information. The other morning, I was reminded why this is so important … and the consequences of what can happen when it breaks down.
Shortly after market open, I received a call from a CFO saying he was surprised by a press release that his company had issued pre-market, about which he was already getting calls from analysts with questions. He had to go to his own company’s website to see what had been released. My second call was from the General Counsel of that same company asking how they could add a Forward Looking Statement paragraph on a material release that had already been issued, as well as make corrections to outdated language in the “About the Company” section.
In the past several months, several of our Medical Technology clients have participated in investment bank-sponsored conferences or traveled to meet investors in one-on-one meetings. In preparation for these meetings, we work with our clients to create a list of topical and provocative questions that investors are likely to ask, and we help to prepare scripted answers. We also create investor profiles ahead of every investor meeting so that our clients have information at their fingertips on competitive share positions, the investor’s background, and our insight as to focus areas for that particular investor.
While most questions that investors and analysts ask in these meetings pertain to the particulars of the business, revenue growth, and market dynamics, we have come to expect the unexpected. We know that thorough preparation is crucial.
For publicly traded companies, successfully communicating information to shareholders and the public depends on the efforts of all employees. That’s why they need a written public disclosure policy that assigns responsibility for the collection and assessment of information, and specifies who will communicate that information and when.
A disclosure policy will help ensure that information is disseminated promptly, credibly, and in compliance with legal and regulatory requirements, including the SEC’s Regulation Fair Disclosure (Reg FD). Reg FD will guide many of your disclosure practices.
Mark Twain said that the “difference between the right word and the almost-right word is the difference between lightning and a lightning bug.”
There’s a lesson in there for all of us. Say the wrong thing (or even the right thing poorly) and you’re going to underwhelm, disappoint, confuse, or even lose your listeners. And during your company’s earnings call, mistakes like that can cause a crisis.
In the past several months, we have been asked by several of our medical device and diagnostics clients to conduct perception audits. Some were small and focused, with specific and timely topics in mind, whereas others were broad-based with long-term objectives. Often, investors and analysts provide feedback that is difficult to hear — especially when they are giving it to a third party and their comments will be confidential and/or not ascribed to them.
While no one wants to receive (or provide) negative feedback, it is important and often can be the most constructive data. If we could offer only one piece of advice to our clients, it would be to listen openly and objectively to your shareholders and analysts when you ask them for their opinion. Don’t try to talk them out of their viewpoint (for which you just asked them), and don’t discount their opinion because they are at a hedge fund or you think they don’t understand your company. Chances are, whatever their perspective, there are others with the same view. Investors are often happy and willing to offer their feedback — especially on a stock position that is meaningful to their fund performance — in an effort to help management teams communicate better. Let them. We think it’s enormously valuable, as their perceptions are your reality.
You worked hard to prepare for your IPO and made it to the first day of trading. Celebrations are certainly in order, but there is plenty of work in the pipeline. In fact, operating as a newly public company presents a whole new set of challenges.
When it comes to investor relations, the focus of your first 100 days as a public company is to educate and communicate with investors and analysts — and to build on the momentum of the IPO to establish credibility, refine your messaging and vision, and provide the information that key stakeholders need. During this time period, your investor relations (IR) function should be in full swing with set procedures, policies, and designated spokespeople in place. In addition to delivering a well-crafted message, meeting with investors, and responding to analyst requests, we recommend that you create a strategic IR plan for the next 12 months and start preparing to report quarterly earnings for the first time.
Below, we share our view of some of the most important tasks during your first 100 days.
Management teams often hear this advice when communicating with Wall Street — under promise, over deliver. While under promising and over delivering is one of the most effective ways your company can build trust and credibility with the Street, it is much easier said than done.
Why are trust and credibility so important? In large part, the long-term value of your stock hinges on how Wall Street feels about your company and how much they can trust what your management team says. Yet building trust doesn’t come easily, and promising more than can be delivered happens to companies of all sizes and stature.