As a corporate earnings season unlike any other gets underway, management teams are grappling with how to discuss their first quarter results or their financial path forward (around 500 companies have already withdrawn their 2020 guidance and many more are likely to do so). Nevertheless, in these uncertain times, it is more critical than ever for company management to speak to investors with crisp, transparent messaging.
We’ve already written about how companies can use their Q1 earnings call to tell a broader business story, emphasizing resilience, actions already taken and actions that can be taken. Beyond message content however, the actual mechanics of how companies will deliver these messages also require thoughtful consideration. That is, how will earnings calls work when almost every speaker is in lockdown from a separate location (and quite likely that location is the speaker’s home)?
Conducting an earnings call is a tightly choreographed performance, with specific individuals playing defined roles, usually together and in person, and in a mutually familiar space. At most companies, the members of the management and IR teams would be sitting together able to make eye contact, refer to white boards or “message maps” in front of them, and use gestures and muted side-conversations to adjust pacing, volume and the flow of responses during the Q&A session.
COVID-19 related social distancing and lockdowns have altered all of this, making the logistics of the call more difficult and adding a new element of risk. In these extraordinary times, when leaders need to demonstrate confidence, resolve and empathy, it would be easy for unease over the mechanics of the call or confusion over who answers what question to be read as anxiety or confusion over the direction of the company, which could directly impact the stock price and the perception of the company’s management and prospects.
While some companies with geographically dispersed leaders are accustomed to convening their earnings call from different locations, most companies will need to adjust and adapt. Corporate executives can draw inspiration from the recent “One World: Together at Home” concert when all four members of the Rolling Stones joined together from separate locations to play their classic “You Can’t Always Get What You Want.” It may not have been a technically flawless performance (as the Wall Street Journal and others noted, drummer Charlie Watts lacked a drumkit in his living room and air-drummed his fills to a pre-recorded percussion track) but the veteran rockers showed a younger generation of musicians how it was done. In the same way, corporate executives can take advantage of technology, planning and practice to make their earnings calls run smoothly. Here are some steps companies can consider, as they come together at home:
Set up a private video call to bring the management team together visually during the earnings call, even as the speakers use a traditional teleconference to connect with investors. This should be a separate session on a different computer outside the teleconference technology. Start this video session at least 30 minutes before the earnings call, to give everyone a chance to get settled and coordinate with one another. The purpose of this video conference is to connect the executives visually not audibly; as soon as you are ready to begin the earnings call, mute the video session and leave it that way. A member of the IR team should host the video session, so that the featured speakers don’t have to focus on tasks like muting and unmuting.
Use technology wisely: Employ either the chat facility built into your video conferencing software or a separate chat tool to send notes or cues, but only do this sparingly as it can be an added distraction. Speakers should be using high-quality phones or headsets (preferably from a landline), rather than computer audio or speakerphone mode on mobile phones or landlines, which can sound hollow or produce an echo.
Find your quiet place: Ensuring a quiet space is a challenge for everyone working from home, but especially so on such public calls with large audiences, so executives should do what they can to ensure against noisy interruptions. Also consider reducing (temporarily) the number of people who will speak during either prepared remarks or Q&A the fewer different background environments introduced, the better the chance things will sound good.
Have backup plans: Every speaker should be prepared with a backup phone at hand in case their line goes out. Script out how you will react if a colleague suddenly drops off or doesn’t respond when cued, and then practice putting that into action. Discuss these contingency plans with your conference call provider.
Prepare for Q&A even more than usual: The Q&A session this earnings season, with the pandemic’s duration and its effects still unknown, will be particularly challenging, especially for those companies in hard-hit industries.
- Investors and analysts know that not all their questions will or can be answered in full, but they nonetheless want a forum to pose them.
- Pre-assign responsibilities for addressing each subject area, and practice handling questions this way. The lack of physical connection will make this more awkward, so take extra time to practice rigorously beforehand.
- Practice also will help identify and rectify potential pitfalls: the CEO who can’t get Zoom to work, the CFO with a bad phone line, the IRO in a noisy home environment, etc. It’s also a way to ensure that your conference call provider is up to the challenge. Practice may not, in this case, make it perfect, but it can make it better.
- During the Q&A, the CEO should serve as emcee; after each question the CEO can start the answer and/or identify another speaker to append or handle as appropriate, e.g., “That’s a high-level answer to your question, but I’ll ask Fran to provide some more financial detail.”
- Consider giving your investors an email address to submit questions ahead of the call so that you have a clear idea of what topics will be of most interest to them; you may also want to augment your script narrative based on what you learn.
- Include in your scripted remarks as much pre-emptive language about what you will and won’t be able to address and repeat those phrases as appropriate in handling Q&A.
Some companies may see this as a good opportunity to pre-record their prepared remarks. This can help ensure higher quality audio and reduce anxiety, although you’ll need a good audio editor to make it sound seamless. If you do pre-record, make sure to build enough time into the schedule, recognize that you’ll still need to take enough time to practice for the Q&A, and have a backup plan in case the recording doesn’t work, or events change after recording and you have to go with a live script.
While the challenges at this moment are unprecedented, the solutions are often the same ones that have always worked: preparation, practice and flexibility. Even if you’re calling in from your living room, without your usual speakerphone (or drumkit) you can still keep the right beat.