Defying Expectations: How Small Caps Can Run Better Earnings Calls
SUMMARY
Small cap companies are gearing up for their earnings calls, and a well-crafted narrative is crucial to cover key points of the quarter and maintain credibility.
To effectively manage expectations, companies should focus on what they can control, structure a well-thought-out story, and engage in timely disclosure.
Qualitative feedback from live Q&A sessions can help sharpen investment theses and add color to equity stories.
While a company's share price may decline even after a great quarter due to factors outside its control, focus on what you can control: staying in control of the narrative and meeting expectations.
When Rhianna took the stage during last Sunday’s halftime show at the Super Bowl LVII, she was in full control of the narrative and her performance. While she stunned the world with her surprise baby bump, she did not go off script. Instead of announcing a new tour or album—she gave fans exactly what they expected: a solid performance.
As earnings season winds down for mega caps, small caps are just gearing up to take the spotlight. For companies that host earnings calls, a well-crafted narrative can keep you on message ensuring you cover all key points of the quarter. Use disclosure sensibly—never seek attention or you risk losing trust and credibility.
Understandably, weaving together a narrative, script and supporting visuals can be nerve-wracking, especially if the previous quarter did not go as planned. With so much at stake during earnings calls, a lot could go wrong and often does when management loses sight of shareholders’ priorities: why they should hold your stock and poorly communicating where the company is headed in 12-24 months. It’s all about expectations and managing them wisely.
Focus on what you can control.
Structure a well thought out story about the highs and low of the quarter.
Timely disclosure.
It’s about resonating with the market and maintaining integrity. Two to three months ago, the stock market was focused on pricing in a recession. Now, the market has rallied, we’re talking about a soft landing. Change in sentiment happens quickly.
Further the conversation after your prepared remarks with a live Q&A. The qualitative feedback can meaningfully sharpen your investment thesis and add color to your equity story. It can also help structure messaging when talking directly with investors months later.
The market may be wrong about your company relative to its peers, especially if you’re struggling with free cash flow or, have limited visibility beyond the current year. Your share price could decline even after posting a great quarter. Much of what happens after the bell rings is not in your control. What you can manage is the story you tell investors and how it is presented—largely centered on clarity of vision.
Use this to your advantage.
