I had the pleasure of hosting a vibrant, engaging webinar on the topic of "Earnings Season Best Practices". With lively discussion and thought-provoking debate, it was clear the collective objective of all participants was to explore the means of enhancing our Investor Relations (IR) practices to deliver effective, value-rich communication with Wall Street.
Beginning the conversation, I addressed the ubiquitous pressure we all experience in IR during earnings season. A meager 5% of the companies I’ve worked with consistently hit the sweet spot of delivering their core messages to the Street efficiently, which is the embodiment of "getting it right". The task is often complicated by multiple "personalities in the room", and leading these interactions efficiently can be challenging. Yet, I stressed that if IR leaders can confidently take control of the situation, others tend to follow suit.
Shifting the focus to our "best practice tips", I emphasized two strategies to be implemented two weeks prior to the quiet period:
Firstly, the IR team should consistently reach out to all covering sell-side analysts for a brief 10-15-minute call. During these sessions, IR can provide an overview of the quarter's events - from conferences attended and types of questions asked, to management's overall demeanor. This proactive engagement not only satisfies the sell-side's interest but also facilitates a seamless transition into the earnings season by reminding analysts of the company's key points.
The second pre-quiet-period strategy involves sending reminder emails to new investors met during the quarter, notifying them of the impending quiet period. This measure ensures that they can schedule follow-up calls in a timely manner, thus avoiding the disappointment of missing the chance to communicate due to quiet period restrictions.
Post-quarter closure, I suggested meeting with FP&A to gain a holistic understanding of "the shape of the quarter". Was it a beat/raise or a meet/maintain or something in between or vastly different? Were there hiccups that need explanation? Is guidance going to appease people or is it a disaster waiting to happen? These are crucial aspects for the IR team to comprehend and effectively communicate and the shape of the quarter should set the “humility tone” for the rest of the call. I recommended starting with an outline of key messages, based on results versus guidance and consensus, and then circulating it among the executive team for necessary modifications.
A key reminder for this stage of the season is that while reporting for Q2 and providing guidance for the full year and Q3, the implication for Q4 guidance is inevitably created. This means IR needs to keenly examine consensus for both Q3 and Q4, preparing for potential inquiries regarding any deviation.
Building the Q&A list early, I emphasized, is a critical task and should not be treated as an afterthought. Construct it alongside the analysis of the quarter’s shape, as it will be the basis for the Street's questions. By building this list early, you give time for management to develop their answers whereas leaving it to the end often creates a rush and indicates to the Street a lack of preparation or understanding of their business that destroys confidence.
Post-earnings-call, I advised investing ample time in refining your key messages for callbacks with the sell-side. Detailed reviews of their models can reveal inaccuracies or deviations from the consensus. Correcting these discrepancies and tactfully guiding them towards your expectations can significantly impact the outcomes. Don't shy away from reminding them of your guidance or indicating where the consensus may land post-call.
To wrap up, our call was both insightful and productive, with a blend of familiar and new participants contributing relevant questions. The shared learning experience was highly valuable, and I look forward to facilitating similar discussions in the future. Judging by the feedback, I am optimistic that the insights shared will enable us all to navigate the next earnings season with greater confidence and efficiency.