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Time to Revamp the Quarterly Earnings Call?

By Dennis Walsh, Vice President & Director of Social Media

And the Award for Best Quarterly Earnings Results Conference Call goes to….

Giving awards to recognize production of an earnings call may be a little premature, but several companies are spicing up what is generally considered an uneventful quarterly ritual by the investment community. It is encouraging to see companies embracing the use of new technologies and social media for investor relations. Before you follow their lead, we can’t forget what is truly important to our key stakeholders about the process: transparency and access to management.

So what is all the fuss about?

Yahoo! Inc.
Yahoo! introduced a new high-quality streaming video webcast format. CEO Marissa Mayer and CFO Ken Goldman appeared on a set that had an evening news broadcast feel as they delivered the typical prepared remarks. Analysts called in to ask questions just as they had done for the audio-only webcasts. The company also live-tweeted key messages from the call on its corporate news Twitter account.

Zillow, Inc.
Zillow made headlines last quarter when it was the first company to take questions submitted live via Twitter and Facebook during the Q&A session of its earnings call. In addition to several questions from individuals, two sell-side analysts submitted questions that were answered by CEO Spencer Rascoff. Zillow also shared infographics with metrics that illustrated their recent growth on Twitter and Facebook to tell a visual story.

Netflix, Inc.
Netflix really shook things up when they announced that not only were they going to be live-streaming video, but they replaced the traditional Q&A session with a moderated session. In addition to a member of the financial press, one of the moderators was a covering sell-side analyst. This created some controversy since moderators fielded the questions in advance – not live like Zillow – by email and Twitter for Netflix CEO Reed Hastings and CFO David Wells. Netflix is covered by more than 30 analysts and it is unlikely that those analysts would submit questions in advance to a competitor. Despite that concern, a lot of questions were asked and covered a wide range of topics. Questions were not attributed to anyone since they received many for similar topics. By doing this, any visible Wall Street presence was essentially eliminated from the call. The video quality was low-budget as all participants used laptop cameras.

Management at public companies have long been criticized for regurgitating the same messages on earnings calls that were already provided in a news release. Investors truly value the opportunity to ask questions of management about the results – more so than listening to the prepared remarks – so think twice before reducing that access. If you are going to adjust your quarterly earnings process, your objective should be to use new methods to enhance the understanding of your strategy and financial results, while maintaining an acceptable level of investor access to management. Investors will view video and social media as unnecessary distractions unless you demonstrate that they are adding insight into the quarterly earnings process.

When determining how to enrich your quarterly earnings process, you should consider taking these steps.

  1. Survey Key Stakeholders – Investors and analysts are not shy about letting you know what they want from your calls. Conduct a feedback survey with key investors and analysts that typically participate on your earnings calls. Questions in the survey can focus on execution of the investor relations program, including the quarterly earnings process. Ask them to rate the process and provide suggestions for improvement. You are likely to see common responses among your investor audience, including requests to share new metrics or a desire for additional access to management. Use the findings to determine how you can improve your quarterly communications.
  2. Presentation Training for Management - Being on camera isn’t for everyone. I wouldn’t be surprised to see some CEOs become Internet sensations in the near future because of video earnings calls - more likely for doing something embarrassing than to admire their exceptional delivery. Also, adding video creates the risk that investors will analyze management’s body language. Working with an executive coach will help management get comfortable in front of the camera, deliver the messages effectively and avoid any on-camera gaffes.
  3. Establish a Social Media Presence – On Twitter, Netflix has nearly 400K followers, Zillow more than 100K, and Yahoo! about 23K (on its corporate news account). While your company may never reach a social media following of that size, you should have an established presence on social channels in order to add value to your earnings process. Get started by securing your corporate name on appropriate social media channels like Twitter, StockTwits and Facebook, etc. Build a following by sharing useful content and let investors know which social media platforms you are using through your news releases and conference calls.

Ultimately, using new technology to supplement the earnings call and to make it more interesting should be encouraged. When doing so, ensure that the changes you make improve access for investors and create greater transparency.

Dennis Walsh is Vice President & Director of Social Media at Sharon Merrill. He counsels clients on a broad array of investor relations and corporate communications issues such as market research, competitive intelligence, earnings announcements, investor targeting, roadshow planning and social media. Dennis oversees Sharon Merrill’s Socialize IR consulting service, which is designed for public companies that recognize the benefits of incorporating social media into their shareholder engagement program.

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