S3E2 - Moira Conlon from Financial Profiles on Balancing Long-Term Value with Short-Term Success When Communicating With Investors

The earnings cycle can sometimes force a focus on communicating short-term results and strategies with the investment community. This can sometimes prevent issuers from sharing their companies' long-term vision and strategy effectively. So how can you ensure that your vision is understood? 

In this episode of Winning IR, Mark Fasken and Moira Conlon, Founder, and CEO of Financial Profiles, talk about balancing short-term success and reporting with creating and communicating a long-term, value-driven company story. 

Listen to the full episode to learn more about:

  • Balancing short-term reporting and selling the long-term strategy of your company
  • How to know if investors understand the long-term strategy
  • What to do when the investment company doesn’t see the long-term vision
  • The components of a long-term approach to investor communications
  • Where to find examples of companies who are doing it well
  • Communicating long-term vision in a volatile market

About Our Guest

Moira Conlon founded Financial Profiles 15 years ago during a recession, which helped to form their belief that every company has a story to tell in good times and bad. She’s an influential and award-winning corporate governance and PR leader, and a frequent contributor to Forbes, CFO Magazine, and IR Magazine. Financial Profiles has a demonstrated track record of leveraging best-in-class communications practices to help its clients attract capital, talent, customers, and media attention.

Episode Transcript

Mark Fasken: So Moira, I think this is perfect timing for this episode, given that sort of peak earnings right now, you and I were just talking about how this is a pretty busy week for you and your team. And so we're going to be talking about short-term communication with investors versus long-term communication with investors.

Balancing short-term reporting and selling the long-term strategy

Mark Fasken: I think that, you know, we could probably agree that the way reporting is set up in North America. Really breeds short-term communication, right? We're always talking about how did the quarter go, semi-annual reporting, you know, constant interaction with investors at conferences and, and roadshows. What do you think are some of the issues with focusing on the short term, and what are the benefits of taking more of a long term approach?

Moira Conlon: Yeah, Mark, that's a really great question. So first, thanks so much for having me here today to talk to your audience about this topic, which is pretty near and dear to my heart. So I'll start with a few comments on some of the issues with short term reporting. So the quarterly earnings process is really an arbitrary time frame each quarter, right?

Where companies report on the past 3 months, right? And this short term focus is exacerbated by the sell side reporting on earnings each quarter. So companies either miss, meet, or beat analyst estimates. And the narrative in the market is really built around that. Okay. So by definition, this puts laser focus on the most recent quarters performance, rather than the company's long term strategy, and plans for value creation. 

And as a result of this kind of quarterly report card, and the pressure to meet consensus estimates, you know, you see companies not wanting to always make the best decisions for the long term. So think about investments in R&D technology products, market expansion.

This quarter, we had a client that had made a lot of investments in their platform, which they really needed to do in order to continue to grow, but we're pretty sure that their earnings report is going to be not that favorably received, even though we did our best to position this quarter in the context of their long term strategy.

Okay. So this creates all kinds of problems for companies in managing their business and kind of balancing the need to make investments, and get positioned for the longterm. And then meeting this quarterly report card demand, if you will. So it's also especially challenging for companies that think about a software company that sells and are big enterprise contracts they might have contracts that close at the end of this quarter or the beginning of next quarter, and so quarterly earnings can be a real challenge for them just based on the timing of contracts, again an arbitrary date, and it's probably even worse for early stage tech, or biotech companies that don't have a lot to report on in the way of fundamentals each quarter. They have milestones and really it takes you know more than one quarter, often many quarters to achieve these milestones.

So those are some of the problems. And Mark, I think cutting to the chase here. The problem with a short term focus, is that it speaks to the wrong investors. So our clients and most companies I know, are really trying to attract long term holders that get in there and partner with them as long term capital.

And this short term focus really, speaks best to hedge funds, short term catalyst focused investors. And you know, the sell side serves those investors. So they're all too happy to write reports that helped them do their job. 

Mark Fasken: And so it's kind of interesting the more, and they're, they're great points because you know, I think taking that short term approach and trying to, you even talked about timing of contracts.

I mean. You know, Irwin is obviously a software company. I've worked in other software companies. I know that there's always this quarterly rush to get contracts in and close deals and things, and that can obviously cause some strange behavior amongst the company. So it's a lot of decisions get made based on the pressure of the quarter, which is obviously not always a good thing, but at the end of the day, I mean, if you're a publicly traded company in North America, you just don't really have a choice, right? I mean, you have to report quarterly. And so my next question is how can companies balance that short term reporting that they in some ways have to do with ensuring that investors are aware of the longer term vision of the company. 

Moira Conlon: Yeah. Well, Mark, that's really the, you know, the art of it. And you need to remember, companies need to remember that long term investors are looking at the long term, and they're expecting some inevitable bumps in the road, and changes that we didn't expect.

And so really that long term story needs to be balanced with the short term. So , I think the way I like to look at it, is that the long run is really made up of many quarterly short runs. So the idea is really to address the short term results in the context of your long term plans and Mark that really takes some work, Okay, because first of all it requires companies to really have thought through their long term strategy, their plans for value creation, and to remember to talk about that on each quarterly call. And the quarters come fast companies are you know, trying to get their numbers together, or trying to get organized to report and far too often I tune into calls that, you know, start off with, well, revenue was up 20% this quarter.

Revenue was flat with last quarter, whatever the situation was and just goes right into sort of the Q over Q results. And in my view, the best calls are the ones that start off with the CEO really talking about their long term vision. You know, their place in the market, really setting the story up for people with the long term vision.

And then throughout the call, explaining the short term results in the context of the long term vision. So it's really a great way to balance, balance out those two needs, as you just said. And it's also a great way to tell your story, right? So you have earnings calls once a quarter. Everyone's invited to an earnings call, right? The whole world can participate. 

In investor meetings, you're just meeting with one investor or at a conference, group of investors, earnings calls are open to everybody. They are a marketing forum by definition. And I really think that they should be an intentional opportunity for companies to really leverage the opportunity to get their story out to this audience, both the long term and the short term, right? And to take a victory lap for the things went right, to explain how did we further our strategy in a good quarter. And a bad quarter to say, Hey, you know, or not even a bad quarter, maybe a quarter, like I just mentioned, where you're making investments.

Yeah, we had to make these investments. We put some of our capital to work on these initiatives, and you'll see the results down the road, and this is what it means to you. So it's a forum to really explain how you're making these decisions, how you're thinking about capital allocation and how the management team is going to,deliver returns, right? 

Mark Fasken: Yeah, I think that's great. And so it's not really about, you know, not speaking to the short term or in only speaking to the long term, what you're saying, you need to balance it out, right? You need to mix in that long term story, make sure that you're touching on some of the shorter term results.

But again, all those short term results, they build into what is the longer term goal? What is the goal? Two years, three years, five years from now? 

Moira Conlon: That's  absolutely right, Mark. And I think sometimes you have to talk about the short term.

That's why people are there, right? So you can't just get on your earnings call and talk about the long term. You need to address the results, but it's really about providing that context and color, and really helping the analysts get their reports right.

Giving them some good headlines, giving them some key takeaways, connecting up the results to the strategy. And the same for the buy side, but it's really, it's up to the company to help on this, right. To guide the narrative. 

Mark Fasken: Yeah, absolutely. And so, as you mentioned, I mean, a lot of companies have fallen into this trap, and I'm sure that there's a lot of companies that do a good job of speaking to the longest term strategy, but many of those that have gone to the communicating the short term and always speaking to the quarter.

How to know if investors are understanding the long-term strategy

Mark Fasken: So how would you recommend a company evaluate or score itself, as it relates to their long-term communication strategy? How do you know whether you're doing a good job or a bad job? 

Moira Conlon: Yeah. Well, Mark, that's one of those points where I think the proof is in the pudding, right? So I think at the end of the day, companies that are doing an effective job of communicating their long-term strategy and balancing short and long and they're, or addressing their plans for value creation to the right audience.

 Long term investors, we'll attract the investors they want, right? So the first place to look is in your quarterly 13 F's to see who's buying your stock. Are these the investors that you want? You can take a look at the investors that you're targeting and meeting. So if you're going to take the time to tell a long term story, and to craft great communications around that.

It certainly makes sense to sync that up with getting that story in front of the right investors. So those are a couple of things. I mentioned the sell side. I think there's a lot that companies can do to help the sell side. Put those results in a bigger context, right? You can wrap up your results and send a note out to the sell side with your release, with some key messages and the, the takeaways that connect the results to the long term strategy.

There's lots of ways to do that, but you can check the analyst reports, and do a comparison between your analyst coverage, and your competitors and see how they're talking about your company versus other ones. And, was the message sent the message received or your analyst just constantly focused on just reporting on the quarter period end of report, right?

And then I think the third thing that we've found helpful on this, is really to conduct a periodic perception study. And we find that candid conversations with investors and analysts can really help companies understand, you know, what the street is getting and what they're not getting and so one of the questions we typically ask in a perception study is how well do you understand the company's strategy and plans for long term value creation?

And it's funny because when we ask that question most people say oh, yeah, I understand that I totally get it I think they're doing a good job there unless they totally don't understand it and they say the opposite But when we ask that former group, well, how would you articulate it? A lot of them don't, a lot of people don't have a great answer.

So that kind of tells us that, they kind of get it, but not really. So whether companies are testing out their messaging and casual conversations with investors or doing a periodic perception study or quick term perception study, that's a question worth asking to see what's being retained and understood, right?

Mark Fasken: Those are great points. I think those are all great points and I love that idea though of the, you're sending the message, but is it being received, whether that's through looking at the analyst reports or those perception studies? Because to your point, it's like, maybe you think that the story sounds great and that you've done a great job communicating it, but if it's not sticking with the investment community, then it doesn't really matter.

Moira Conlon: Yeah, one of the holy grails there is when you see, you see the sell side actually using your words, republishing slides from your earnings deck that help tell the story, right? That's when the light bulb goes off and you go, okay, they're getting it, they're engaged.

 They're using what we're giving them to help tell our story. Right. 

Mark Fasken: Yeah. Yeah, absolutely. Absolutely. Okay. Great. So let's say, you know, we're kind of going through a bit of a process here now. So we've come to the conclusion as a team. I'm an IRO who's listening here and I'm realizing that, you know what, I think we're too, too short term focused.

What to do when the investment community doesn't see the long-term vision

Mark Fasken: The investment community isn't understanding our longer term vision. What are some actionable tips that an IRO could go through to address that, right? What are some things that they could do to start to have more long term communication, to engage with the investors in a more, with a more long term view?

Moira Conlon: Yeah. So Mark, I think it starts off with really having that sit down with your leadership team and making sure that you really have your long term plan for value creation, and your investor messaging, and any go forward targets really articulated and on a piece of paper, right? So it's not really a casual thing.

It's something that really takes time and focus. I happen to be a proponent of leveraging the year end reporting process as a time, where in a disciplined way, every year you can step back. And, it just take a look. What were the achievements for the last year? Right? How did we do in executing against our plan?

What has changed? How did we perform, and what's changed? What's changed in the current market environment? That informs our go forward, outlook and thinking, right? How does our investment story? How has it changed? How should we be positioned for the year ahead?

 So I feel like, during that year end reporting process, IROs are usually super busy right now. They're preparing several different important communications, right? We have the fourth quarter and year end earnings call and script. We have the annual shareholder letter. We now have proxy cover letters to contend with, and ESG and sustainability reports, and things like that in the mix as well. So it's really coordinating all of these different documents where your IR message really needs to hum and be consistent and well told. I think that's the time during that process to step back and formalize that story.

So you can, you have it formalized. And you have a chance to think through are there any changes to our go forward guidance is now a good time to recast our long term operating or financial targets, right? The first thing is that, and when you're creating that story, I think it's super important to think about that from your story, with the perspective of an activist, right?

An activist being an investor that would prefer to see the cash register ring sooner rather than later. So value created now versus waiting. So really figuring out how to tell that story and how to tell it in a way that's believable and that people can't poke holes in. So that's first is having a story that works. And, the second part of that is telling the story. So where do you tell it? So I think clearly, earnings, quarterly earnings communication are key. The investor presentation is absolutely a critical place to get that narrative going, right.

And then, of course, you've got things like strategic press releases and investor days. So lots of places where you can start are communicating that long term plan and vision. 

Mark Fasken: Yeah, I think that's right. And I love the idea of like the, I'm just coining this apparently, but new year, new you maybe a little bit on the end of year report, right?

What are the components of a long-term approach to investor communications?

Mark Fasken: It seems like a good time to say, okay, we've gotten through a whole year. Here's what happened. And here's what we're planning for next year, in the next 3 years, in the next 5 years and sort of reminding everybody of that. Of that plan, so that's a great point and good timing, right? It probably seems a little bit odd to come out in the middle of the year and suddenly be saying, oh, hey, don't forget about our long term vision might throw investors off a little bit.

Moira Conlon: Yes, yes, and Mark, you know, I know we've had some conversations in the past about this topic, and one of the things that I think is really interesting on this whole long term approach, there's a group that's called the CECP, the Chief Executives for Corporate Purpose. And a few years ago, they launched this initiative called the Strategic Investor Initiative.

And the purpose of this group, was to convene top company CEOs with the world's largest institutional investors to promote a focus on the longterm, and to establish new communications best practices. And, in some of the information that they published, they were defining the longterm as three to seven years.

And they published a template for investor presentations. And the goal of these was to help companies really tell, effectively tell their story for long term sustainable growth. And they outlined some key components in there for doing that. And I think these are super helpful, but basically they include.

Corporate purpose, market opportunity, strategy, competitive position, risks and opportunities, value creation plans, operational and financial performance, talent and human capital allocation, and corporate governance. And I have gone back to that every time I'm working with a client to help them tell a story, a long term story.

That works for today and that really speaks to the needs of both the actively managed institutional investors, and the passively managed investors, which definitely care about the long term risks and opportunities, right? 

Mark Fasken: Yeah, absolutely. And one of the, I guess one of the questions that I have for you, and this is a little bit.

A little bit off the cuff, but all those things that you mentioned and for everybody, you, you mentioned that quite quickly. 

 I'll just say for anybody who maybe missed that it's C E C P dot C O. If you want to go to the website, chief executives for corporate purpose. And one of the questions I had for you from that, Moira, was, you know, a lot of the, a lot of people would have a lot of the things that you just mentioned, right?

You mentioned a bunch of different sort of items and data points that go into conducting the story. So I think, many public companies, they have the data, they have the information somewhere in the organization. It seems to me like one of the biggest challenges, but curious, your thoughts on this is like, How do you actually pull that together into a cohesive story and narrative, that you can communicate to investors in a digestible way, because that's a lot of information that you just mentioned, right? That could be slides and slides of info, but you almost need to boil that down to a couple sentences. No? 

Moira Conlon: Uh, you know, Mark, I'm not, I'm not sure. I think that most of this stuff is addressed in one way or another in many investor presentations.

And I wouldn't say that this is a slide for slide setup. Taken together, these are all the factors that kind of go into an investment decision on does this company have a good story for sustainable value creation, right? I think there's, I think you're right. It's a lot of information.

I think there are so many great examples out there today, there are so many companies that are doing such a good job of really putting all these things together. And I think the whole shift in the workforce, to next generations and the focus of the next generations on , things like purpose and culture and, D. E. I. And and sustainability, that and the shift to passive investing, the shift to capital going into sustainability funds, I really think that companies need to think about their presentation from the perspective of both categories of investors and figure out, yet again how to balance that out. Okay. And so, yes, it's telling that story like that, but I think Mark, if you think about the Holy Grail for any company, the Holy Grail would be. To have, I don't know, let's say, some 30, 30, plus percent of your stock held by, the long, the passive investors, which are long term holders by definition, right?

BlackRock States, re Vanguard and others, as long as they love your story, and your governance, and everything else. Then to also attract the long term holders that are actively managed, right? So, you know, Capital Group and Fidelity and Wellington and Putnam and whoever, right, it's, so if companies really focused more on telling that long term story, I think they would do better at attracting a great group of shareholders that took a lot less effort to manage than a lot of quick turn people that you have to meet with all the time over and over again that are never going to be long term holders, right? 

Mark Fasken: And I mean, just for anybody who goes to the CECP website, you mentioned this earlier, but you mentioned there are a lot of companies that do this really well.

Where to find companies doing it well

Mark Fasken: There's a section actually on the homepage. Where it mentions some of the companies that are part of CECP, part of the coalition. And so I imagine that's probably a good place to go and get some inspiration, right? Going to those companies websites, looking at sort of their investor presentations, etc.

Moira Conlon: Mark, I think that's a great idea. The other thing that we always advise our clients to do, and we do ourselves when we're helping on these sorts of projects, follow the leader, right? So I always say that, for small and mid cap companies, stand out best in class communications that looks and feels like the way the big companies communicate, really is a competitive advantage that I believe leads to better capital access, right?

If you show up for a meeting and you have a really, really well thought out, well presented investor presentation and you're ready to present it, and you're ready for the Q and a, it just makes you the kind of company that these investors feel confident investing in, right? So definitely I suggest it, look sure that I'm sure the, I haven't been on the CECP site for a little bit, but I do recall there being great examples there.

I also, whenever I'm looking at a peer group, I look for what we call the aspirational peers. And so we look at the direct peers, which would be relevant in market cap to the company that we're helping. And then we also look at a couple of standout companies that are not in the peer group. So the large cap leaders in any space, and see what they're doing, because that's usually where you find best practices that you can emulate, right?

Mark Fasken: For sure. And so I think there's that that is a great resource. And so I appreciate you sharing that. Absolutely. We're, we're coming along to our to our last question here, and we've covered a lot of ground about the importance of the long term. Reporting and long term communication how you can evaluate whether you're doing a good job or whether you're too short term focus.

How do you communicate long-term strategy in a volatile market?

Mark Fasken: We talked about once you've done the assessment, what are some of the ways, or what's the best time to start to communicate that long term vision? And so we're obviously in a really volatile market right now, where short term valuations are down, and in a lot of cases, not really representative of an organization's long term value.

So what recommendations would you have for IR teams? And how they can communicate that long term strategy to improve shareholder confidence during these volatile times? 

Moira Conlon: Yeah, that's a great question Mark, and one that you might imagine we're seeing quite a bit of right now. So I think it's fair to say that we transitioned almost overnight from a long period of growth, low interest rates, easy access to capital.

To a time of inflation, rapidly rising rates and very limited access to capital for many, many companies, right? So I think what's really important in a time like this is, is definitely for companies to remember their longterm story, right? Some of it's kind of picking yourself up off the ground, right?

We have clients that went from being a 2 billion market cap company to a 200 million company. And so that's tough. So really, I think what's important is to, again, articulate your story in the context of the longterm, explain how in the current environment, with the challenges that are here today, how can the company still realize this dream?

And if there's changes that need to be made to the expectations, get that out there, so that you're effectively managing expectations. So if you have long term operating targets or financial metrics out there that don't work anymore, gross margin profit, ROA, whatever. You know, when the market has a big, abrupt change, if your business is highly impacted, it's time to change those, but it's not time to throw out the baby with the bath water. It's time to get some defensive messaging. And explain to the street really how you're positioned to weather the current cycle, how your company is potentially recession resistant, what experience you've had managing through a downturn, how you're going to manage expenses or, reduce your cash burn rate.

And sometimes these kinds of markets create dislocations, Mark, where, you know, companies have opportunities to leverage the disruption to build market share and things like that. So, it takes a little bit of of work and thought, but it's really reiterating your core value drivers, the intangibles that drive value for your company.

And to remember that, in a time of market dislocation, there's usually a lot of selling. So you're probably going to have to educate a lot of new holders on your stock. And so nothing wrong with telling a fresh story to a fresh set of value investors that weren't involved in the trip from 2 billion to 200 million, that are going to give your company a fresh look because they like value opportunities, not high flying growth stocks.

So really keeping your audience and your targeting in mind, as you focus on telling that story for now. 

Mark Fasken: Moira, so many good actionable tips in this podcast. We're definitely going to have some work coming for us turning this into some actionable tips and tricks and LinkedIn posts and everything.

So this has been extremely, extremely helpful and thank you for your time. 

Moira Conlon: Well, Mark, it's my pleasure. Thank you so much for the opportunity and I look forward to staying in touch with you.

Follow the Podcast

About Winning IR

Winning IR is a podcast exploring the diverse insights within the investor relations community. Join host Mark Fasken as he discusses the winning strategies, tactics, and shifts in thinking with innovative investor relations professionals who are redefining the profession.

Each episode features a different challenge, innovation, or perspective on the ever-evolving role of IR, giving you real, actionable insight you’ll be able to use to build a better investor relations program. 

You may also like

all Podcasts
S3E4 - Andrea Daley from Dentsply Sirona on Navigating IR Amidst Executive Transitions

S3E4 - Andrea Daley from Dentsply Sirona on Navigating IR Amidst Executive Transitions

Read more
S2E3 - Adam Borgatti from Aecon on How to Expand Your Scope of Responsibility as an IRO

S3E3 - Adam Borgatti from Aecon on How to Expand Your Scope of Responsibility as an IRO

Read more
Moira Conlon from Financial Profiles on Balancing Long-Term Value with Short-Term Success When Communicating With Investors
Best Practices

S3E2 - Moira Conlon from Financial Profiles on Balancing Long-Term Value with Short-Term Success When Communicating With Investors

Read more
Winning IR - Jordyn Eskijian from H&R Block on Aligning Purpose and Performance Through ESG

S2E10 - Jordyn Eskijian from H&R Block on Aligning Purpose and Performance Through ESG

Read more
Luke Wyse from Triumph Financial on The First 90 Days in a New IR Role

S2E9 - Luke Wyse from Triumph Financial on The First 90 Days in a New IR Role

Read more
Megan McGrath from Cushman & Wakefield on How To Build Better Relationships With the Sell-Side
Best Practices

S2E8 - Megan McGrath from Cushman & Wakefield on How To Build Better Relationships With the Sell-Side

Read more
Rodney Nelson from Twilio on the Importance of Deeply Understanding Your Shareholder Base
Best Practices

S2E4 - Rodney Nelson from Twilio on the Importance of Deeply Understanding Your Shareholder Base

Read more
Winning IR - Rebecca Gardy From Campbell Soup Company on The IRO Blueprint For Leading Through Influence
Best Practices

S2E1 - Rebecca Gardy From Campbell Soup Company on The IRO Blueprint For Leading Through Influence

Read more
Winning IR: Building a Strong Support System: The Power of Community in Investor Relations With Matt Brusch, NIRI

S1E10 - Building a Strong Support System: The Power of Community in Investor Relations with Matt Brusch, NIRI

Read more
S1E09: Bridging the Gap Between IR & PR to Build Attractive Investor Brands with Fabiane Goldstein
Best Practices

S1E09: Bridging the Gap Between IR & PR to Build Attractive Investor Brands with Fabiane Goldstein, Grayling

Read more
 Winning IR: Involving Multiple Stakeholders in Investor Relations with Jeremy Cohen, Alight Solutions
Best Practices

S1E08 - The Whole Picture: Involving Multiple Stakeholders in Investor Relations with Jeremy Cohen at Alight Solutions

Read more
Winning IR: Creative Tactics for Standing Out and Engaging Investors with Alyssa Barry & Caroline Sawamoto, irlabs
Best Practices

S1E07 - IR Innovators: Creative Tactics for Standing Out and Engaging Investors with Alyssa Barry & Caroline Sawamoto, irlabs

Read more
Winning IR: IR on the Cutting Edge: Navigating Investor Relations in Emerging Industries With Leah Gibson, Cybin
Best Practices

S1E06 - IR on the Cutting Edge: Navigating Investor Relations in Emerging Industries With Leah Gibson, Cybin

Read more
Winning IR: Catapulting Your Career: The Habits of High-Performing IROs

S1E05 - Catapult Your Career: The Habits of High-Performing IROs with Smooch Repovich Rosenberg

Read more
Winning IR: Building a Strong Foundation: Creating an In-House Investor Relations Department from the Ground Up with Brooks Rennie, Byline Bank
IR Departments

S1E04 - Building a Strong Foundation: Creating an In-House Investor Relations Department from the Ground Up with Brooks Rennie, Byline Bank

Read more
Winning IR: Winning the Battle for the Boardroom - Navigating the Do's and Don'ts of Proxy Fights with Michael Verrechia, Morrow Sodali

S1E02 - Winning the Battle for the Boardroom - Navigating the Do's and Don'ts of Proxy Fights with Michael Verrechia, Morrow Sodali

Read more
Winning IR: The Most Frequently Asked Questions About ESG with Victoria Sivrais, Clermont Partners

S1E01 - The Most Frequently Asked Questions About ESG with Victoria Sivrais, Clermont Partners

Read more