Ten Strategies for an Effective Earnings Call
Hosting the quarterly financial call is a basic task of a public company. Not all investor calls are as effective as they could be, and some can be downright dull and unprofessional.
How, then, should you prepare for an effective earnings call?
Here is a list of 10 do’s and don’ts that will help you get the most out of your quarterly calls:
1. Use a script. These days the vast majority of earnings calls are pre-scripted, since this offers companies a distinct number of advantages. First, every member of management knows what they are saying and when they are saying it. Second, legal can make sure no one is going to say anything they shouldn’t. Third, it typically avoids stuttering and uncomfortable silences. Most importantly, it allows to you decide in advance what you want to say, in what order to say it, and the key points you want to emphasize.
2. Make it sound unscripted. You may be reading from a script, but you need not be robotic. Try to be animated and engage the audience. Reading through the script in advance and making sure that your own lines are written in your natural talking style is key. Try to imagine you’re talking to someone at a party, someone who knows nothing about your company. Engage them with what you have to say.
3. Liven up the financial presentation. Give your CFO something more to say than, “Sales came in at $20 million, an increase of 14 percent year-on-year.” Because he’ll likely say something similar about R&D expenses, SG&A expenses, net income, and other line items. Talk about why sales increased or why the net-loss figure improved. Don’t let the CFO’s financial review be the moment that analysts fall asleep or check their email.
4. Rehearse your earnings call. This will allay nerves before you do the real thing and will ensure that everything flows smoother when the time comes. Practice Q&A with a firm like Westwicke (in fact we can help you with all aspects related to earnings calls) so that you have prepared remarks for the questions that are likely to be thrown at you when the call opens up for Q&A. Rehearsing will also give you an idea of how long your call will last. Plan on less than twenty minutes for your prepared remarks and between ten and twenty minutes for Q&A.
5. Let content drive your call. If you don’t have a lot to say, keep your prepared remarks brief and consider hosting a longer Q&A session. Earnings calls aren’t compulsory, but they are expected and should you choose not to host one, you lose an important weapon in your investor relations arsenal. The minimum number of calls a development stage biotech should hold is one a year — this should be the fourth quarter call at the beginning of a calendar year when you give guidance for the year ahead.
6. Schedule your call for late in the day. After-market hours calls are better than pre-market calls. Analysts and investors are generally busier in the mornings as they assimilate each morning’s news and events. Don’t add to their workload — or if you do, don’t expect to hold their attention for very long. By holding your earnings call afterhours, you give analysts more time to digest what you have to say and to write about it while your news is still fresh in their minds.
7. Your work isn’t done when the earnings call has ended. After the call you should be making pre-arranged phone calls to your covering analysts and major shareholders. These stakeholders may have additional questions that they didn’t have the time or desire to ask on the public call. Either way, it’s a good chance to give them some personal attention and strengthen your key relationships.
8. Manage the Q&A queue thoughtfully. As the host of an earnings call, you have the ultimate say over who gets to ask you questions and in what order. The key thing here is to reward your most diligent analysts and prevent your earnings call from getting hijacked by amateurs, mom and pop investors, or short sellers.
9. Use the earnings call to showcase forthcoming events. Earnings calls are one of the few times you have a direct line to all of your company’s key counterparties. Tell them about that investor day that’s coming up in four weeks or about your upcoming appearance at an investor conference. Make the most of your earnings call. After all, you’re the one paying for it!
10. Make the call accessible. Ensure there is a replay for your earnings call and the ability to participate online, rather than just via phone. This ensures you reach the widest audience possible since not everyone will be able to take part in real time or with a telephone. We live in an age of accessibility and earnings calls need to keep up with the times. The incidental cost of a webcast and replay are well worth it in the long run.
The quarterly call can be a nerve-wracking experience for many companies, and getting it wrong can have significant consequences for your stock price. You don’t have to do it alone. Westwicke can help you prepare for and execute your quarterly earnings call.
ICR Westwicke is the largest healthcare focused investor relations firm in the country. We provide customized investor relations programs and independent capital markets advice to small and mid-cap healthcare companies.
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