Home page: IR Playbook
Mastering communications across the earnings cycle
The earnings process is a key opportunity to tell your story to a wide audience. Outside of special events, such as investor days and AGMs, it offers the biggest platform to communicate directly with investors, analysts and other stakeholders about your strategic vision and long-term goals. That’s especially important in today’s market, when investment professionals cover an increasing number of stocks, stretching attention spans to breaking point, and macroeconomic news dominates the business headlines. For companies to cut through, they need to leverage earnings to deliver a clear, concise and consistent message.
In this report, you will find advice covering different stages of the earnings process, from building your corporate message and Q&A prep to consensus data management and post-event engagement.
You will also discover case studies from experienced IROs and exclusive poll data on earnings practices. Taken together, this report will help you master communications across the earnings cycle.
To build a consistent message during earnings, companies should take the long view. Earnings present a key opportunity to reiterate key messages about the business, such as strategic goals, competitive differentiators and management strength.
Companies need to identify which areas they want to focus on, and then make sure they are returning to them every quarter, while explaining how the situation is evolving in line with quarterly results. There are different strategies and tactics for doing this.
Some companies look to a recent strategic announcement, such as their last investor day, to select the key points they want to convey. Another common practice is to use the previous quarter’s earnings materials as the starting point for the next quarter. This naturally builds consistency into your press release, prepared remarks and other earnings materials, while also saving time on preparation.
During earnings, companies should ‘never hesitate’ to communicate the ‘core strategy and message of the business, including the long-term objectives and the reason the business exists,’ says Jason Fooks, head of IR at NYSE-listed Brookfield Asset Management. ‘Companies should use the earnings call to continue to repeat those messages.’
Fooks says a valuable test is to consider whether your main stakeholders are able to easily recite the most important strategic priorities for your business. If they would struggle to do that, it suggests those central messages need to be repeated more often and with greater clarity.
'Focus on the strategic objectives you want to communicate,’ he says. ‘Present the goal, how you’re planning to get there and what happened this quarter to support that growth. Keep doing that over and over again.’
Turning to communications within a specific quarter, consistency is once again a central concern for IR teams. A helpful approach is to identify a small number of key messages and include those throughout the main earnings materials. That provides a clear structure for organizing everything you want to communicate into a manageable group of topics.
‘It’s really important to have very clear messages about what you’re trying to accomplish for the quarter,’ says Fooks. ‘I find having three key messages is a really simple framework for how to do things. Once you do that, everything else becomes much easier. For our press release, we have those three major ideas. It's the same for our prepared remarks and any video we put out on social.’
He adds that companies should be careful not to get lost in the numbers during earnings communications.
‘Investors’ minds are like anyone else’s,’ he explains. ‘We think about things through stories and narratives. It’s much harder, as humans, to just think about numbers.
'The more we can tie numbers, themes and progress around narratives and stories, the more they will resonate and be remembered.’
Having three key messages is a really simple framework for how to do things
What are the main barriers to telling your story in 2024? IR Magazine’s poll finds that investor receptiveness to your sector and macroeconomic uncertainty are the top two challenges, followed by internal budget constraints. A number of ‘other’ topics are also identified by respondents, such as lack of interest in your region, a management reshuffle, poor financial performance and activist pressures.
For companies in an out-of-favor sector, Fooks’ advice is to focus on two areas: credibility and relationship-building. ‘Don’t pretend everything is amazing’ he says. ‘You want to explain what the challenges are, how you are addressing them and what the opportunities are. Investors want to know you have a management team that is on top of the situation.’
Undoubtedly, one of the main challenges around earnings is preparing management for Q&A. That is the section of the call where market participants hope to glean the most information and every word is scrutinized, not only by investors and analysts but also by increasingly sophisticated AI models.
Jason Schmidt, vice president and head of IR at Upstart, an AI lending platform listed on Nasdaq, says his company, like most, sets up a Q&A document ahead of the call. It contains around 50 questions, although the first 10-15 are those most pertinent to the quarter and likely to come up.
When creating the document, Schmidt uses a variety of channels to anticipate topics. The first is simply to consider which questions came up in the previous quarter and remain relevant. After that, he says peer earnings call scripts and analyst notes should be the biggest indicators of what you are going to get. ‘If you do all those things, you should be able to reliably capture more than 90 percent of the questions,’ he says. ‘There shouldn’t be any surprises if you’re doing that correctly.’
In IR Magazine’s poll, we asked how IR professionals anticipate questions for earnings call Q&As. Reading analyst notes emerges as the top result (selected by 91 percent), followed by informal conversations with investors and analysts (85 percent), tracking peer earnings calls (74 percent) and anticipating industry trends (70 percent). Around one in four respondents indicate they use some kind of perception or feedback survey to prepare for potential questions.
A number of ‘other’ results mentioned by respondents include advice from brokers and analysis of results to anticipate questions or areas of confusion for stakeholders.
While predicting specific questions is a key process, a deeper issue is whether IR teams feel confident that analysts are going to raise appropriate queries on the call. That comes down to relationship management between the IRO and sell-side coverage. Analysts should understand which questions are right for the public earnings call and which should be reserved for callbacks or other channels.
‘If you have a good relationship with your analysts, they understand that the call is for high-level questions relevant to the quarter,’ says Schmidt. ‘The callback, which they should have shortly afterwards, is for more detailed, drill-down questions, such as anything to do with the model, or anything they’re not 100 percent confident is a question for the C-suite.’
Companies may also want to consider the order of likely questions. Given the aim of maintaining a high-level call, there can be a danger of having too many questions in a row that focus on the same topic or have the same angle, meaning the conversation could drill down to a level that is not desirable for the earnings call. IR teams may want to create balance by switching between analysts with buy and sell ratings, or by anticipating the subject areas individuals are likely to raise.
‘What I typically try to do is rotate between topics of interest,’ says Schmidt. ‘Maybe you have an analyst who is very focused on the capital structure and another who’s very focused on go-to market, and so on.
'In effect, you rebalance the level of question every time, and you try not to let it get too deep into any one topic.’
If you have a good relationship with your analysts, they understand that the call is for high-level questions relevant to the quarter
IR teams must keep track of consensus estimates data to help them understand market expectations, anticipate surprises and control the corporate narrative.
That information is hugely valuable for the business, both internally for competitive analysis and externally when crafting your communications.
Fooks argues that having a good understanding of consensus data is a crucial way for IR teams to move from being tactical to becoming a strategic partner for the management team. ‘IR professionals who have a very strong handle on how the Street understands them and their peers have a massive differentiator,’ he says.
He lists the aspects of consensus his company tracks: ‘We like to know what the estimates are for us, what’s driving those estimates, what their models look like, how we compare with our peers, and then make sure there are no meaningful differences between how we are thinking about the business and how analysts are thinking about it.’
In order to be effective with consensus data management, it's recommended that companies create a schedule. Within each quarter, they should know when they are reviewing sell-side models, when they are discussing deviations with the management team or the sell side and how that fits into the broader earnings schedule, including any blackout periods.
But this task is complicated by a variety of factors. IR Magazine's poll shows the top challenge when it comes to managing consensus estimates is standardizing across analyst models, followed by internal resource constraints and a wide range of forecasts. Among the ‘other’ options mentioned by respondents are constraints on the sell side, managing new analysts and the number of analysts following their stock.
Schmidt says when it comes to consensus estimates, he doesn’t experience a lot of challenges from the analysts' side as they are very receptive to conversations about their models. ‘You give them a call and remind them of things you’ve publicly said before that might be a little incongruous with what they wrote or what their model says,’ he explains. ‘As long as you’re willing to have some flexibility with when that gets updated, they’re usually very accommodating.’
IR professionals who have a very strong handle on how the Street understands them and their peers have a massive differentiator
The vast majority of companies undertake structured engagement following the earnings call, although approaches differ, influenced by the size of their analyst following, the availability of management and individual company preferences.
Most companies hold callbacks with the sell side, with some opting for one-on-one meetings while others take a group approach. A smaller but still significant number of IR teams also organize callbacks with the buy side, especially top shareholders.
While companies want to ensure analysts and investors have what they need following the earnings call, they have to balance this with the fact that executive time is extremely limited. As a result, it’s valuable for investor relations teams to set up a framework for engagement that suits their individual circumstances.
At Upstart, Schmidt prefers holding quick one-on-one calls with analysts following the quarterly results. ‘I find it helpful to shorten the time [with the analysts], but talk to all of them individually,’ he says. The typical schedule Upstart follows is around an hour of meetings held with the chief executive and CFO, followed by a few hours with just the CFO, and then the remainder is run by IR, with potentially another executive such as the head of finance.
‘The important thing here is to rotate the different analysts each quarter,’ explains Schmidt. ‘I think it’s appreciated by the analysts, even though they may only talk to the chief executive in a callback maybe once or twice a year.
'They know they’re not being put on the second or third tier of the analyst list. It’s also good for the CEO as he’s getting a diverse view of the company.’
While callbacks are a key element of the earnings process, they are not considered the most important when it comes to measuring the success of the event. The most critical success metric for IR teams is senior management preparedness, according to IR Magazine’s poll. This is ranked first by the largest number of respondents (26 percent) and also comes top when considering the average across first, second and third-place rankings.
The second-most important area across all the rankings is stock price performance, which garners 25 percent of first-choice votes. Other factors are also viewed as crucial, however. Almost a quarter of respondents (23 percent) place quality of analyst notes as the most important success factor, while nearly three in 10 (28 percent) rank media coverage second.
Feedback following the call is a major channel to understand how well the company’s intended messages have landed. Again, this is an area where practice varies. Some issuers send out feedback surveys via email, while others wait to see what comes up in conversations with investors and analysts.
Whatever your channel, Schmidt says companies can receive more useful, nuanced feedback by waiting a little while following earnings.
‘I appreciate feedback immediately after the call, but I think it’s never going to be anything you weren’t already anticipating,’ he says.
‘The much more useful feedback is what you get a week later, after the sell side has talked to all of its buy-siders and received feedback and questions from them. At this point, potentially a narrative around the earnings has started to emerge – hopefully influenced by us – but coming from the buy side itself.’
I find it helpful to shorten the time [with the analysts], but talk to all of them individually
AI tools are predicted to have a major impact on how companies manage the earnings process. From pre-call research to script writing, anticipating Q&A topics and post-call sentiment analysis, there are myriad ways AI could help IROs be more efficient, better prepared and more impactful with their communications. Service providers in the IR space have already begun to release earnings workflow tools that incorporate AI technology, although these are still at a nascent stage.
Our poll finds 11 percent of IROs are using AI tools to support the earnings process. Among the rest, results are broadly split between those who are actively considering using AI for earnings (44 percent) and those who are not (41 percent).
Fooks has experimented with a range of generative AI tools to help with earnings-related activities and says he has found it useful in two particular areas: summarization and editing. For example, when he doesn’t have time to listen to an entire peer earnings call, he might ask ChatGPT to summarize the key themes from the CEO comments or Q&A. He warns, however, that you can’t use the current tools to summarize financial figures, as the results will not be accurate.
While existing AI tools have their limitations, Fooks says there’s no question IR professionals can use the technology to augment their capabilities. ‘I don’t think our profession is going away in the foreseeable future, but I do think the IROs using AI are going to be much more productive,’ he says.
As this report underlines, there are many different facets to communicating effectively during the earnings process. IR teams need to employ a mix of strategic messaging, careful planning, relationship-building and industry expertise. Below, we round up 10 takeaways from the playbook.
See the big picture: The earnings call is one of your best platforms for reiterating key strategic messages about the business. Think about ways to discuss your core strategy and long-term goals each quarter.
Keep it simple: Select three key messages to communicate to your stakeholders during each earnings event. Repeat these across all your quarterly materials.
Don’t get lost in the numbers: Investors, just like everyone else, struggle to respond to data without context. Your message will resonate better with people when you tie figures to stories and narratives.
Focus on what you can control: Companies report a lack of investor interest in their sector as a major challenge to telling their story. In this situation, focus on building credibility and strengthening relationships.
Stay close to your analysts: Use your relationships with analysts to ensure only appropriate questions are asked on the public earnings call, with more detailed questions reserved for the callbacks.
Create balance: To keep the conversation at a high level during the Q&A section, anticipate the questions that may come up from different analysts and then switch between individuals with different views or interest areas.
Get on top of consensus estimates: Being an expert on how the Street views you and your peers is a great way to raise your strategic impact within your company. No one else at your firm has that information, and it’s highly useful to management teams.
Spread attention during callbacks: Senior management will only have limited time available for callbacks. By rotating the order in which you speak with analysts, you can ensure a large number get some management contact throughout the year.
Let the feedback marinate: While feedback at any time is welcome, the information you receive from the sell side a week or so following earnings, after analysts have spoken with the buy side, is better for judging how your messages have landed.
Get started with AI tools: Some IR professionals are already using AI tools to support earnings work, with many more to follow. Two areas to consider for IR implementation are summarization and editing.
