Earnings conference call definition
/What is an Earnings Conference Call?
An earnings conference call is used by public companies to discuss their financial and operational information with the investment community. In these calls, a presentation team discusses recent financial results, issues guidance regarding expected future performance, and responds to questions. The calls are intended to expand upon information already released in a company's quarterly or annual financial statements.
Who Participates in an Earnings Conference Call?
The primary participants in the earnings call are the CEO and CFO. They discuss all of the financial and operational results and projections (if any) of the business. The investor relations officer (IRO) may be involved in the introduction to and conclusion of the earnings call, but otherwise operates in the background or as a discussion moderator.
When to Schedule an Earnings Conference Call
The earnings call is normally scheduled for a date immediately following the release of a company’s quarterly Form 10-Q or annual Form 10-K filing. Notice of the call is made by press release to gain the widest distribution, but can also be by e-mail to ensure that analysts and key investors receive timely notice.
Earnings Conference Call Infrastructure
Earnings calls are usually handled by third party conference calling services that set up phone lines and handle the queue of callers who have questions for the management team. They also typically provide a recording of the entire call; consider posting this recording in the investor relations section of the company website, so that those unable to attention the call can still listen to it at a later date. These posted recordings are usually taken down once a reasonable period of time has passed, so that investors are not listening to out-of-date earnings calls.
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Structure of an Earnings Conference Call
The earnings call is normally divided into two sections, with the first part being a prepared set of remarks about the company’s results, while the second part is set aside for a question and answer session with whomever is listening to the call. The call begins with the IRO introducing those employees who are participating in the meeting. The IRO reads a boilerplate safe harbor statement and then hands off the meeting to the CEO. The CEO will personally address most of the material to be presented, with the occasional participation of the CFO to discuss more detailed financial topics. If the company provides guidance regarding its expectations for future results, this information is added after the discussion of the company’s historical results.
The first part of the call follows a baseline script that is used repeatedly for all of a company’s earnings calls. The scripted part of the earnings call should not last longer than 30 minutes.
Following the prepared statements in the first section of the earnings call, the CEO returns control of the meeting to the IRO, who acts as the moderator for the question and answer session. Participants in the call state their questions, and the IRO directs the question to the most appropriate person.
Earnings Call Best Practices
Here are several best practices to ensure a smooth and productive earnings call:
Practice. Run through the entire call in advance with your team, including C-suite executives, IR team, and other relevant departments. Anticipate questions and prepare responses.
Present only key data. Highlight essential numbers and trends instead of reading out line items. Direct the audience to your earnings report for full details.
Allocate enough time for questions. Many investors and analysts find the Q&A section the most valuable. Make sure it’s substantial and leave ample time to answer questions thoughtfully. Further, give sufficient time to analysts who cover your stock regularly, especially those with high credibility and influence.
Stay consistent. Ensure that the messaging aligns with what has been communicated in past calls, press releases, and other public forums.
Maintain a professional tone. Stay calm and professional, even if there are tough questions. Tone impacts perception, and an optimistic yet realistic outlook generally resonates well.
Provide a transcript. Offer a recording and a transcript of the call, ideally within 24 hours, so stakeholders who missed the live call can review it.
Monitor feedback. Track social media, news coverage, and analyst reports for feedback on the call to understand how your message was received.
Keep it timely. Start and end the call on schedule. Respect attendees' time, as many analysts attend multiple calls on earnings days.
By focusing on clarity, transparency, and preparation, you can build a call that communicates effectively and bolsters investor confidence.