What to Do When It’s Earnings Season and the News Is Bad

February is earnings season for the fourth quarter and full year of 2017. It’s when most publicly traded companies report their financial performance to shareholders and to the analysts who advise them. For many companies, Q4 and full-year 2017 earnings numbers are likely to be favorable. In recent months, economic growth has been picking up and the anticipated new tax cuts are now a reality.

Business is good!

But that’s not always the case. At some point, every company may have to deliver bad news. It’s not easy, but it’s critical to get it right. Here are some ideas for communicating disappointing results in your quarterly earnings conference call:


Communicate more, not less. Some executives tend to pull back on their internal and external communications when their companies experience difficulties. And while quarterly earnings calls are not mandated by the Securities and Exchange Commission, it’s unlikely that a company that’s been conducting these calls will suspend them during difficult periods. However, some companies temporarily change the format of their calls. The call may be shorter, have one or two fewer executives participating, or less time may be devoted to Q&A. These and other changes that depart from the format previously followed are readily noted by those listening to the call – especially analysts – and can raise concerns.

Another change sometimes prompted by disappointing results (or the belief that there will be bad news to report in the future) involves ending the practice of providing earnings guidance (management’s view about what the company will earn in the next quarter). The decision whether to issue guidance is a complex one, but not doing so may send this message: the company is not doing well so its management finds it hard to forecast. Another downside of providing less information is that it can create the perception that management is not being held accountable. And in light of corporate scandals, disclosure has taken on added importance. In short, more information generates greater confidence and understanding.

Don’t bury the lead. In journalism, there’s an expression that says, “Don’t bury the lead.” In other words, the most important information should appear in the headline and in the first paragraph, not be buried somewhere later in the article. One mistake some execs make is to downplay the bad news by mentioning it (almost as an afterthought) later in the call or by trying to neutralize it with phrases that are at odds with the actual results (e.g., “We are well positioned.” “We are pleased with.” Etc.).

Open with a statement that characterizes the quarter. If the results are disappointing, say that directly. Doing so enhances credibility. (Warren Buffett, one of the most credible and plain-spoken business execs, once told investors, “I made one particularly egregious error, acquiring Dexter Shoe for $434 million in 1993. Dexter’s value promptly went to zero. The story gets worse: I used stock for the purchase…”)


Next, explain what’s behind those disappointing results – in specific and concrete terms.

Then, discuss your action plan to address the problem. For example, if you lost a major customer, talk about what you’re doing to get new customers or keep existing ones.

A few years back, we were coaching a number of executives at a company that owns and manages shopping centers throughout the United States. Our goal was to help them improve their quarterly earnings conference calls. For several quarters the company’s financial results had been disappointing because of the recession. During the coaching session, the CEO mentioned that there were signs that things were starting to improve. Then he relayed a story about a phone call he recently received from an executive at Target, the giant retailer. The call was a “heads-up” that in the coming months Target planned to build a number of new stores which would serve as anchors for several new shopping centers. When we asked the CEO whether he planned to tell that story in his upcoming conference call, he said no. We convinced him to do otherwise – even if he couldn’t reveal the name of the retailer.

Simply telling analysts that things are starting to look up would have lacked impact. It’s a cliché. Analysts have heard it many times before (and probably wouldn’t believe it). But when you tell them that a national retailer is planning to expand, that resonates and enhances credibility.

Communication = selling; successful selling = transferring energy and enthusiasm.

Although content is king in the quarterly earnings conference call, powerful messages can fall flat if they aren’t delivered well. Every executive who speaks during the call (including those who are there simply to respond to questions) must be able to communicate in a confident and compelling manner. No low-energy, boring (and therefore, not credible) speakers!

Most conference calls are conducted via teleconference. Listeners hear the executives, but don’t see them. This poses some special challenges when communicating. A spoken message contains three components: verbal (the words you say), vocal (how you sound) and visual (what people see). With the visual element absent in a conference call, the vocal element takes on added importance. Research shows that it constitutes 86 percent of your believability (with verbal contributing 14 percent). Think about the amount of information communicated in a single word when someone says, “Hello” when answering the phone. (Have you ever listened to the greeting you recorded on your phone and thought about what signals it’s sending?) Your voice conveys both logic and feeling.


A few suggestions:

  • Try not to read from a prepared script (audiences view “readers” as less knowledgeable), but if you do, make it sound like you’re talking, not reading.
  • Your delivery must be fluid – not “halting.” Avoid too many “non-words” (“uhh,” “ahh,” “umm”).
  • Just as people naturally gravitate to individuals with outgoing personalities, they are inclined to listen to ideas presented with energy and conviction. To help sell your message, increase your normal energy level 50 percent. Try standing up when talking; volume and inflection tend to increase when we’re on our feet. If you’re sitting, lean forward.
  • Practice your remarks three times, aloud, into a recording device (use your smartphone). Practice should include identifying the questions you’re most likely to get (including questions you hope no one asks), and verbalizing your answers rather than simply thinking about how you’ll respond.


End on a positive note. Your closing remarks should reference the most important idea or ideas discussed during the call. The reason for this is what’s called the principle of recency. People tend to remember best what they heard last. (By the way, we define “closing remarks” as what the CEO says right before the Q&A discussion AND some final words before the call ends.

It’s okay to acknowledge the disappointing earnings, but that’s not the takeaway. The last words listeners should hear should be what your plans are for going forward. And those comments should be delivered not with a whimper but with impact and authority.