Your company’s first earnings call is a major milestone, one that calls for thorough preparation as you seek to make a strong impression and instill confidence within the investment community.
Here are five key points to keep in mind as your management team gets ready for its debut earnings season – lessons that should reinforce your credibility and help carry you through years of successful calls.
Shape Expectations
To avoid shaking investor confidence when you report earnings, it’s vital to manage the Street’s expectations. Miscommunications and misunderstandings ahead of time can make for a stressful Q&A session on the call and difficult follow-up conversations, so make sure analysts are working off the right assumptions.
Roughly three weeks before your earnings release, touch base with analysts to discuss their models and root out any erroneous views or concerns over your assumptions. As you go over Street estimates for the quarter and beyond, identify any outliers relative to your own projections and address miscalculations that analysts may have made.
Talk to analysts in advance about these outliers and cite them in your conference call script if you need to explain why earnings appeared to “miss” the consensus estimate or justify an unexpectedly weak forecast.
Prepare for Q&A
A few days before you release financial results, your management team, working with investor relations, should pre-record the earnings conference call – or at least the part that’s fully under your control. The live question-and-answer session that follows your prepared remarks is another matter.
After you’ve recorded and approved your prepared comments, the leadership team, again working with IR, should hold a Q&A practice session. Be prepared to respond in detail to questions about your performance and outlook and to elaborate on your prepared remarks, reiterating your key points in the process.
Research reports published before the call can shed light on specific issues that may interest or concern certain analysts and on the types of questions they’re apt to pursue. Recent inquiries from investors also may provide insights on the questions likely to come your way on the call
Hold a thorough practice session in which executives leading the call take tough questions, including possible curve balls, from others on the team. Be ready to address any negatives that may capture analysts’ attention. The more you practice, the more confidently you should be able to handle quizzing from analysts and investors.
Choose your Timeslot Wisely
While it may seem like a fairly innocuous detail, when you do your call matters. Make sure your chosen date doesn’t conflict with existing events — for the company or the industry — that might distract you or those who follow the company. Don’t ever report on Monday morning or Friday afternoon – it’s never good to command people’s attention when they are either walking in or walking out the door. Identify when your peers report after the quarter closes and strategically position yourself such that you are able to learn from what they disclose and how analysts and investors respond. And while there are arguments on both sides for whether to report before the market opens or after the market closes (such as what time zone the management team is in), never report earnings while the market is open.
Design Your Call
An efficient and well-structured conference call can start you on the right foot. Investor audiences these days appreciate calls with clear, succinct remarks focused on new developments and a few key messages – at least when it comes to prepared commentary, which you should limit to 15 minutes maximum.
First, the CEO should provide an overview that avoids wading through financial figures, instead summarizing achievements from the quarter, outlining company strategy and touching upon goals and anticipated achievements for the upcoming quarter and year.
Your CFO should briefly elaborate on financial results, focusing on key points without repeating every figure in your release. This segment of the discussion also should look to the future, providing color on your guidance and correcting any misconceptions that analysts may harbor.
Address any disappointments or difficulties directly in your prepared remarks; don’t wait for analysts to raise them in the Q&A session.
Follow Up
Swift and well-placed follow-up conversations with sell-side analysts who cover your company can reinforce your call after the fact, allow them to ask questions privately and alleviate the risk that they publish notes with errors or inaccurate assumptions. Sell-side analysts wield significant influence over stocks and can be leveraged amplify a company’s message to investors.
Schedule your follow-up calls weeks in advance to avoid missing connections on a busy earnings day. Develop a strategy for how you’ll handle questions, concentrating on the big picture and avoiding a focus on ratings and price targets.
Leave your calendar open the next day for any spillover analyst follow-up calls and conversations with key investors.
By preparing thoroughly and diligently, you can reassure Wall Street that your team is ready to perform as a public company.
Do you have questions about handling your first earnings report? ICR brings years of Wall Street experience to help you navigate the investor community. Please get in touch.
