The Best Practices for Effective Earnings Calls

At any time of year, preparing for earnings calls requires (and deserves) diligent preparation, as it is, without question, one of the most impactful events for a public company.

And while earnings calls may seem tedious, each call represents a unique opportunity for a company's leadership team to grow investor interest, influence its shareholder base, and answer critical questions from attendees—all while sharing valuable insights into the company’s financial performance and outlook.

Earnings calls are quarterly (or sometimes annual) meetings held by publicly traded companies during which earnings and other financial results from the set time frame—among other topics—are shared with investors, analysts, and the media. Most earnings calls also include discussions around a company’s future plans, goals, and forecasted earnings. 

As we continue to operate in a world preparing for a global recession, Jason Fooks, SVP of Investor Relations at Brookfield Asset Management, joins us to share his learnings from the nearly 100 earnings calls he’s done throughout his career. Continue reading to learn the best practices you can follow to host an impactful and well-executed call that will strategically grow your audience and disseminate your company story.

Why are earnings calls so important, and how can IR teams make the most of them?

The earnings call represents an incredible opportunity for investor relations teams. Every year or quarter, you’re able to share your company’s story with the largest audience you’ll get in that period. And while a standard line of thinking may be that you’re only required to discuss earnings and answer investor questions, this is a missed opportunity in many ways. 

Earnings calls provide a chance for leadership to communicate the company’s strategy and how its performance in the past quarters has helped advance company goals. Remember, reiterating your company’s vision for the investment community is just as important as discussing earnings. 

By doing so, not only will investors understand what happened, but you can also provide a clearer vision of why it happened and what pieces of the data are most important. In a world with so much noise and data that investors and other audiences have to intake in a short period, simplifying this information for attendees will make the earnings call more valuable and important to listen to, and in turn, grow your audience.

How can IROs grow their audience for earnings calls?

Across any corporate effort or industry,  expanding your audience is key to growth. Building an engaged audience can be paramount to the success of your investor relations program. But how can IROs raise awareness around their company in such a way that holds stakeholder attention? One suggestion is for IR teams to learn new communication methods by observing sales and marketing functions and bringing those tactics into the IR world. Growing your audience allows you to tell your story to a broader group of stakeholders, and in turn, hopefully, it helps to acquire new, right-fit shareholders.

However, being able to grow your audience will take work. A lot of what makes a successful earnings call is creating something that investors not only have to but want to tune into. IR teams should consider how to generate some exclusivity around the earnings call. Can data points or other interesting information be saved and shared exclusively in the earnings call? This can include something that isn’t necessarily critical to the financial results, such as longer-term guidance, metrics around investment activity, or capital raising. 

IRO’s should also consider sharing new information and content in a captivating format for investors to listen to, such as dynamic slideshows or video formats. This, in addition to simplifying the data, speaking in a positive tone, preparing ahead of time for dynamic questions, and overall having a set narrative, will contribute to an IR team’s and company’s success.

Key themes to cover during your earnings call.

1. Company Strategy

It’s recommended to start any earnings call by reminding your investors of what the company’s strategy is. Every quarter, IR teams and company leadership should continue to share the following with the investment community:

• What the company strategy is. 
• What the company vision is. 
• What the company goals are. 
• How the company plans to get there. 

Remember—a key measurement of a good CEO and a successful company is if you can ask any employee, "what is the mission of this company," and they can answer confidently without any hesitation. If they cannot provide insight into why the company exists, leadership is failing to focus their staff and, subsequently, failing to drive the company forward.

The same can (and should) be true of an investor relations team. When an IR team is speaking to an investor that’s engaged in the company story, that said investor should be able to easily answer questions regarding the purpose of the company, its mission, and its strategic advantages. If they’re unable to do so, leadership should spend more time laying the foundation—so make sure you don’t miss the opportunity to control the narrative during an earnings call. Remind everyone where the company is and how the past quarter fits into the bigger picture. 

2. Three Big Ideas

IR teams and leadership must remember that there is an insurmountable amount of data all over the market that’s focused on earnings. Many—if not most—investors, analysts, and media outlets are required to read lengthy financial reports an hour or two before an earnings call. 

To avoid information overload, companies should frame their earnings calls around three big ideas and spend time supporting those objectives. Because the truth is, attendees of your earnings call will not remember every point you made. So IR teams must make sure that when the earnings call is complete, there are three big ideas attendees can remember moving forward. 

3. Trending Issues in Your Industry

Before hosting the earnings call, IR teams should ensure that they research and monitor their industry throughout the quarter. It’s critical to stay educated on key topics and issues you know that analysts, investors, and the media care about, so you can respond to their concerns in a well-versed manner. This includes tuning into your competitors' actions and reporting as well.

It’s recommended to compile the questions you expect to hear during the Q&A portion of the earnings call with subsequent conversations occurring in the media. Be sure to include topics and questions from prior earnings calls that may be relevant again this quarter. 

How to frame negative earnings results.

When it comes to earnings calls, you may be in a situation where you’re required to report negative earnings. Should you find yourself in that scenario, you must remind the public of the strategy and vision of the company. This can help to avoid a strong adverse reaction. 

Remember that providing context around your results is vital for earnings call messaging. If your results were lower than expected, IR teams should be straightforward and provide context as to the reasoning and plan for the quarter and year ahead. Position it in the context of the larger strategy. The more you can share about “the why,” the more investors will understand (and remember) the bigger picture. Subsequently, it doesn't necessarily make the event about individual quarterly results and negative quarterly performance. 

How to prepare for an earnings call to ensure everything runs smoothly.

Earnings calls put IROs in a unique and challenging position. On the one hand, it’s an excellent opportunity to engage a large audience (the largest you’ll have every quarter) with a compelling story to grow said audience. It requires creativity, trying new formats and content, and having new speakers to make it dynamic and engaging. However, because earnings calls put an enormous spotlight on the company, it simultaneously puts the IR function on center stage. Earnings calls are a critical aspect of the IR playbook because should things not go well, there will be negative connotations for the business, and could potentially undermine the company's credibility.

As a result, IROs, other members of the investor relations function, and company leadership need to spend time ensuring processes are put in place regarding the preparation before the earnings call. This includes:

• Organizing logistics. IR teams must prepare for the logistics of the earnings call itself. It's recommended to find a qualified vendor that will lighten the load of preparation and execution. From there, companies should prepare the setup for the call, carefully choose the location where it will be held, and conduct a test run of all technology. 
• Updating your website materials. In today's digital world, companies should ensure that their investor website and social media channels are up-to-date before the earnings call takes place. Proactively educating your investor community before they attend the event will help ensure the earnings call goes smoothly.
• Preparing for the Q&A session. It’s critical to the success of an earnings call to have a C-suite and IR team that are on the same page when it comes to answering questions from the public. IR teams should spend time with the company’s C-suite to ensure they’re well-prepared for what's to come. This includes brainstorming potential questions that could come up, hosting mock Q&A sessions, and subsequently receiving appropriate feedback. It can also be helpful to speak to your research analysts to learn what they're hearing. Alternatively, you can also listen to peers' earnings calls—especially ones that your research analysts cover—as often, they have thematic questions that they ask across the various companies they follow. That may give you insight into what your audience is interested in or what they plan to ask during the call.

How to work with management to deliver a compelling earnings call presentation.

When delivering a compelling earnings call presentation, it’s first and foremost recommended to conduct media training for the entirety of the management team. This allows vital spokespersons to practice presenting essential information while having a third party provide direct feedback to leadership (helping avoid biases).  

However, while incredibly effective, media training should be paired with other solutions. This includes drafting call scripts for the C-suite that tell the company's story in a compelling and engaging way. From there, leadership can apply edits they feel necessary to ensure they're speaking in their tone and voice.

Keep in mind that a key part of the IR function is to offer constructive feedback. People that attend your earnings call will listen to the tone of the discussion, so be sure to pay close attention to subtle cues your C-suite may be portraying. If you feel the message needs to be clarified, help them communicate in a way that better reflects the company.  

How have the expectations for earnings calls changed over the last several years?

Earnings calls allow IR teams to communicate their company's story, relay new strategies, and address the investment community. And as time progresses, many people have begun to explore innovative techniques—including creative new formats such as virtual video calls, fireside chats, or something new altogether. 

Remember: being thoughtful and purposeful in your approach while having a solid understanding of what will best resonate with your audience will help make your company’s next earnings call efficient and effective. 

For a deeper understanding of earnings calls and the best practices surrounding them, tune in to Jason Fooks’ episode of Winning IR—Irwin’s interview-style podcast that explores diverse insights within the IR community.

Are you interested in being a guest speaker? Reach out to us at podcast@getirwin.com—we’re always looking for fresh perspectives on the investor relations industry.