Many companies miss a vital quarterly opportunity to use their earnings conference calls as a storytelling tool to build excitement around their long-term value-creation potential and garner interest in the stock. How can you move past the all-too-often rote regurgitation of financial results, listing of random achievements without context, and needless details on products or service offerings?
For starters, apply these four tips for creating a more compelling quarterly conference call:
Tip #1: Strategic Context is Key
Earnings calls present an excellent opportunity for your management team to build credibility and receive credit for operational accomplishments during the quarter – but failing to anchor those achievements in the context of the company’s strategy can be a huge, missed opportunity.
For example, discussing the features and functionality of a new product is fine. But communicating that the launch of the product advances your strategy to enter a new vertical and expand your total available market by 50% is infinitely more compelling. Or, if investing in organic growth is a key element of your strategy, make sure that you state how past investments have translated into new products and increased market position.
Discussing how the company is effectively delivering on your stated strategy demonstrates that management is doing what it set out to do, and signals that future goals can be trusted. When drafting prepared remarks for a conference call, consider categorizing your corporate developments in line with the elements of your strategy. This will focus investors on your strategy, value creation potential, and management’s executional success.
Tip #2: Weave in Your Investment Thesis
The foundation of any effective investor messaging platform is a compelling investment thesis. So naturally, an effective conference call should weave in this critical positioning. When creating your investment thesis, think through the key reasons someone should purchase your stock. For example, this may include the size of your market opportunity, the key differentiators of your product or service, your unique go-to-market strategy, your path to increased profitability, and how you are allocating capital to drive further stakeholder value.
In your prepared remarks, while you need not explicitly spell out the investment thesis as you might in an investor deck or IR website, those messages should still come through in the remarks. Look at the various elements of your investment thesis and pressure-test your script to see if they are at least implicitly reflected in your prepared remarks. For example, if a key element of your investment thesis is your industry-leading technology, are you discussing new innovations, or how your technological superiority helped to win new business in the quarter?
Maintaining a focus on high-level investment thesis messaging will enable you to tell an effective story that drives investor interest over time.
Tip #3: Tie Your Numbers to the Narrative
Simply repeating numbers on your conference call that investors and analysts most likely have in front of them provides no value. Yet in way too many cases, a rote repetition of the income statement, balance sheet and cash flow statement from the CFO is what we hear on the quarterly call. Instead, you should provide strategic context around the numbers, especially with those metrics that may have unusual year-over-year or sequential comparisons.
Another best practice is to structure the CFO script with an eye on how your financial results support your value-creation strategy. Are you a growth story? Cash generation story? Margin expansion story? Or, maybe all of the above? Your CFO’s remarks are most powerfully conveyed when you connect the numbers back to this value creation narrative. This can be accomplished by starting your CFO remarks with two or three key takeaways that put your results in strategic context. Additionally, you can put key metrics in strategic context throughout. For example, instead of jumping right into the report on revenue (e.g., “Our revenue for the quarter was X compared with Y”), lead with strategy (e.g., “Accelerating profitable growth is a key tenant of our strategy and this quarter we continued to deliver with revenue up X% as we capitalized on our strong market position and attractive tailwinds.”)
This approach provides more value to investors and is certainly more interesting to hear.
Tip #4: Rehearse the Q&A
Arguably, what investors care most about during a quarterly call is the Q&A session. But far too often, management spends nearly all of their preparation time fine-tuning the prepared remarks, and a dearth of time rehearsing Q&A. To be truly prepared to provide effective answers that satisfy investors and build credibility, management should schedule multiple Q&A prep sessions during which they, 1) align on the two to three key strategic messages to emphasize on the call, 2) discuss talking points to key areas of investor concern, and then 3) repeatedly rehearse answering the key questions during a mock Q&A session. Spending time preparing for the Q&A session has the best ROI in your quarterly earnings communication activities.
By leading with strategy and executing a message-driven, compelling conference call, you can help investors understand your investment thesis, take the focus off the short term, and ensure investors appreciate your long-term value creation potential!
