Quarterly earnings conference calls are an important communications tool to reach analysts, investors, reporters and others who follow your company. Although publicly traded companies are not required to conduct these calls, most do. For good reasons. Among them – the calls help analysts develop more accurate earnings expectations.
Over the years, we’ve listened to and critiqued many such calls of our clients. So we have a pretty good idea of what a best practices call sounds like.
As a way to identify some of those best practices for this article, we decided to critique the most recent conference call of a non-client company. We won’t reveal the company’s identity, but we chose one of the top ten Fortune 500 companies within the General Merchandisers category (think: well known retailers).
Here’s our assessment of the company’s performance in four areas:
Scheduling and Structure:
Our selected company held its call on a Thursday (the best days for conference calls are Tuesday through Thursday). However, its 8:30 AM Eastern start time might have presented some challenges for Central, Western and Pacific time zone listeners. The company gave plenty advanced notice of the call, and its archived calls are easily accessed on its website for those who missed the call or simply want to hear it again.
Most conference calls today run an hour in length, and this company’s call was exactly that. Of that hour, about 15 minutes were allocated to prepared remarks – the remainder to Q&A – a good split. We liked that there were only two execs conducting the call – the CEO and CFO. (Some companies allow too many participants; this can create complexity and confusion.) But a mistake was allowing the conference call moderator (not a company employee) to read the opening “Safe Harbor” statement. That individual struggled to get through what admittedly is a pretty boring, but necessary disclaimer. A better approach would have been for the top investor relations exec to handle that responsibility, and say some words of welcome to the listeners.
In this call, the CFO was the first to speak. Our advice is to have the CEO be the first presenter. (More about this later.)
No PowerPoint visuals were used. Although this is a refreshing change and might keep listeners focused on the speakers, we encourage the use of visuals – sparingly – for information that lends itself to a visual representation (e.g., pie charts, bar graphs, photos, numbers, etc.).
This company had good news to report – a solid performance for the quarter. That’s always a good message. However, we’d give the company mixed reviews on its messaging.
As mentioned above, the call should have started with a powerful statement along with some brief detail characterizing the quarter – delivered by the CEO. He or she should provide the “30,000-foot view,” then turn the call over to the “numbers person.” Avoid leading off with reviewing the numbers – information that’s already contained in the earnings release.
One thing missing during the opening remarks were what we call “sparklers” – stories, examples, anecdotes, analogies – things that grab and sustain attention.
At the end of the call, the CEO thanked everyone. Although that’s polite, it’s not enough. What was needed was a powerful closing – something memorable that reinforces the key message of the call.
Both speakers read from a prepared script during the opening segment. This is customary, although some of our clients opt for a different approach – speaking from notes, which results in a more conversational style. Reading from a prepared script is perfectly acceptable; for one thing, it keeps you on the “straight and narrow.” But if you read, you must not sound like you are reading. (Think of news anchors who appear to be speaking extemporaneously, even though they are reading from a TelePrompter.)
Unfortunately, these execs missed the mark. They delivered their remarks in a low-energy, boring manner. The delivery was flat, uninspired and lacked passion. Nothing they said stood out; everything they said got the same emphasis.
Successful communication involves connecting with the audience. Just as people naturally gravitate to individuals with outgoing personalities, they are inclined to listen to ideas presented with energy and conviction.
The good news? During Q&A, both men shifted into overdrive, and displayed that much-needed energy and conviction.
We’d give this company high marks on Q&A. In a recent poll, buy-side analysts said 45% of the earnings call should be devoted to Q&A. This retailer significantly exceeded that recommendation; 75% of the call involved fielding questions.
Both the CEO and CFO participated equally. (In some conference calls, the CEO dominates – something which may lead listeners to infer that the company’s a “one-man show” with perhaps very little “bench strength.”). In fact, with many of the questions, both execs chimed in – creating the feeling of a discussion or conversation as opposed to a scripted response. Their approach sustained interest and generated credibility.
Questions were answered in a straightforward manner – clearly and without jargon. In one of his answers, the CFO stated, “We haven’t done a really good job of that in the past.” Those kind of candid negatives are rarely heard, but go a long way to enhancing trust and credibility.
Also, both men skillfully used the analysts’ names when responding to questions. That’s a good idea, regardless of whether or not you’re familiar with the analyst. It adds a warm, human touch.
Want an assessment of your company’s most recent quarterly earnings conference call? The Ammerman Experience can help you identify your strengths and weaknesses, and offer suggestions for improvement. Contact us: 800-866-2026.