This time of year finds many companies preparing for earnings calls. For some of you, it’s like readying to get a tooth pulled. You’d rather not, but have no choice. Yet speaking to shareholders doesn’t have to feel like a dreaded dental appointment. When approached correctly, you may actually start looking forward to sharing your story in what should be a controlled, yet candid conversation.
Most calls begin with a company official reading a safe harbor statement but that doesn’t mean you should read your way through the call. Like a presentation or talk, you want to connect with your listener to instill confidence and commitment even when the news isn’t positive. This article examines the eight biggest earnings calls mistakes and how to prevent them moving forward.
Set the Tone
The best opportunity to frame your message is the moment you open your mouth. What do you want shareholders to feel? Optimistic? Excited? Encouraged? Or perhaps you want to offer reassurance after a dismal quarter. A clear opening statement that articulates your vision and strategy sets the tone moving forward. It also puts a human face on your company.
Talk, Don’t Read
Reading is not communicating. While you must prepare an outline and talking points, it’s your tone, pitch, attitude and delivery that instills confidence and credibility. As reported by Vanity Fair magazine, “During his first earnings call with analysts, (Google CEO Larry) Page read, with a discernible lack of enthusiasm, a 394-page statement, then took off before the traditional question-and-answer session. The next day Wall Street lopped $15 billion off his company’s market value.”While you don’t want to sound too excited or overpromise, you must convey energy, enthusiasm and passion if you want others to care about what you’re saying.
Your listeners can’t remember everything you say which is why you should minimize messages and focus on three key points you want them to take away. This doesn’t limit you to talking about three things, but concentrating on several key points instead of many will help reiterate the story you’re telling. Make sure to support what you’re saying with concrete examples, details and facts that help your audience better understand your strategy, how it ties to developing or changing trends and what they can expect moving forward. Just like you, your listeners appreciate clear concise information.
Acknowledge Problems but …
This is not a Sunday morning talk show and you are not a freshly media trained politician who can choose not to answer the question. It’s important to acknowledge and address problems but then move on and outline what you are doing to correct them and what you anticipate moving forward. For example, at a recent analyst conference, Merck & Co. chief executive Kenneth Frazier acknowledged that setbacks in drug testing made his first year as CEO difficult. But instead of wallowing in those difficulties, he said important new drugs were on the horizon and he anticipates better news in 2012 which was clearly the message he wanted to deliver.
Make Numbers Meaningful
It is your job to tell listeners what you want them to know and that means putting numbers into context. It’s not enough to simply repeat what was in the press release that went out before the call. Instead, take it a step further by marrying the numbers to what you want people to hear. Apple does a great job at this. On a recent earnings call, it was announced that despite not meeting projections, 20 million iPhones had been sold in Q3 of 2011 alone. The company then went on to say this makes Apple the top smartphone manufacturer in the USA.
Cut the Corporate Speak
In today’s Twitter savvy world, more and more people expect information to be delivered in clear crisp concise nuggets. The financial world is no different. While your listeners may require economic detail so people know if they want to buy, sell or keep your stock, they also want plain words that help them understand what the information means to them. Just because your listener is an investor or potential investor doesn’t mean they are well versed in your business so speak to be understood.
To Show or Not to Show
Increasing numbers of companies are complementing their earnings calls with slide presentations. This can be positive if it’s done correctly. The slide should follow you, not the other way around. If the slide can help clarify or explain technical information to a non-technical audience, your audience will welcome the effort. But if the slide is cluttered with too much data and text that is not delivered effectively, you risk dis-engaging your audience.
Many of our clients put ample time into preparing for calls, but sometimes fall short when it comes to practicing out loud. They say things like: “we don’t have time” or “we’ve done this many times before so we’ll be fine” but practice creates polish and polish spells confidence. Not only should you practice the script, but role playing the Q&A portion of the call is essential to prevent you from being caught off guard. If you fail to answer a question properly, you may inadvertently send the wrong message which can affect stock price and company reputation.
Shareholders want leadership and innovation. They want to know how you will execute vision and strategy moving forward to meet projections, fix problems and compete in today’s global environment. There are plenty of people competing for their money. They want to know why they should invest with you. Earning trust is a constant commitment that should be devoted to preparing for each and every call.