Navigating Corporate Earnings Efficiently and Effectively
Investors find it unsettling to live in the past. We’re at the tail end of the fourth quarter earnings season, and already investors are leaning into the future rather than dwelling on what happened in 2022. With attention spans worse than goldfish (yes, that myth was recently debunked), grabbing the interest of investors will always be a race against time. When investors tune into your call, they are in the right cognitive and emotional state to hear your message so weigh your words and use the time wisely.
A typical earnings call lasts about 45-60 minutes. However, this season’s calls seem to be longer than usual. Ultimately, this could be blamed on elaborate explanations over slower growth and worries about recession and inflation. Similarly, management teams may be over compensating with granularity of data discounting the immersive nature of high-level equity storytelling as the part of the farewell. With the average sustained audience attention span running at 10-15 minutes, it’s important to keep earnings calls short or you risk distraction or worse, indifference.
Semantics is a critical component. Studies of transcripts from thousands of earnings calls show it is a major predictor of stock price movement than traditional hard earnings and sales data. Investors are listening for specific signals. This could be an updated number, deal or metric. Once they hear it, they check out (figuratively). To keep listeners involved, add color to your word choice and deliver it with a confident tone of voice. Removing all emotion during the Q&A part of the call will render your message lifeless, and it may fall on deaf ears.
For small caps, the presentation part of the call should be no more than 15 minutes with 15 minutes for Q&A. Hit key numbers, highlight milestones and clearly explain anything that might be ambiguous. Then open up the lines for questions. After all questions have been answered, take a cue from the large caps and before you thank them, share your sentiment about the upcoming year. Post the transcript and presentation to the IR section of your website immediately following the call. And lastly, proactively follow up with analysts and key shareholders afterwards to field additional questions.
TOP 5 TIPS FOR EARNINGS CALLS
15/15 framework (presentation vs. Q&A).
Be clear in messaging.
Focus on the investor’s needs.
Use storytelling to your advantage when explaining data.
In addition to thank you, always end by looking forward.
References
1. Busting the Attention Span Myth: https://www.bbc.com/news/health-38896790
2. An Exploratory Study of Stock Price Movement from Earnings Calls: https://arxiv.org/pdf/2203.12460.pdf
