10 Ways Your Quarterly Earnings Call is Driving Investors Crazy

6 minute read

10 Ways Your Quarterly Earnings Call is Driving Investors Crazy


Most small-cap investor relations professionals have never been institutional investors.  Accordingly, they are not always as apprised as CEOs and CFOs would prefer regarding common earnings call practices, including those to be avoided at all costs.

Here are 10 detrimental practices.

1. Issuing the earnings press release moments before the call. If companies understood how frustrating this is to investors, they would never do it again. My reaction when I was an institutional investor was always the same when this happened: either this company doesn’t have its act together, or there are issues in the press release they hope I don’t have sufficient time to review in order to ask about on the call. Investors know that “stuff” happens, but aim for issuing the press release a minimum of 20-30 minutes before the call.

2. Horrible acoustics. Don’t undertake quarterly earnings calls from untested venues or with untested technology.  Most companies have enough of a challenge just getting investors to partake in their quarterly calls; the last thing you want to do is denigrate investor confidence right off the bat due to poor sound quality.  There is no excuse for poor-functioning speaker phones, rustling papers, management team members who are barely audible, etc.  When in doubt, do a dry run and record it.

3. The never-ending safe harbor. Ask your lawyers for the shortest possible safe harbor language.  To benchmark the goal in this regard, if it is longer than 150-200 words, consider asking them to try again.  Reality check: a good percentage of retail investors don’t care about the admonitions regarding forward-looking statements, and institutional investors have heard the cautionary language 1000s of times – literally.  So this is predominantly an exercise in covering your company’s “behind” in as few words as possible.  When – as is commonly the case – companies start off calls with safe harbor statements that last for multiple minutes, most investors think two things: (1) this company is getting deplorable legal/capital markets advice; or (2) we’re about to really be lied to.

4. Assuming everyone knows what your company does. One of the reasons so many small-cap companies toil in obscurity is due to deficient storytelling. Given the paucity of sell-side research coverage and the fragmented marketplaces for their stocks, small-caps have to take every opportunity they get to educate prospective investors, partners, customers, and potential acquirers about who they are, and what they do.  Earnings calls are a great example.  Unfortunately, the lion’s share of small-cap companies make the mistake of assuming that everyone who is on their quarterly calls knows what their company does.  They don’t.  Do your shareholders a favor and start out your earnings calls with something like the following: “I know there are some people on the call today who are new to the [Company Name] story.  First, welcome.  Second, let me just take a minute or two to tell you about our mission.”  You might wonder, “Why should existing investors care whether their portfolio companies do this or not?” When small-cap investors buy stock, they eventually will need someone to sell it to – and the more possible buyers, the better.  One thing is certain: the fewer investors who understand what your company does, the less chance existing investors have of making money.

5. Reading a script like you’ve never seen it before. Whether or not officers prepare their own call scripts or have someone else prepare the scripts for them, there is no excuse for failing to sufficiently rehearse the script. More specifically, when officers struggle through their scripts or sound like they are awkwardly reading something that they’ve never seen before, it erodes investor confidence in the message.  Unfortunately, this is incredibly common.  Some more specific thoughts about how to perfect script preparation/reading is here

6. Accompanying .ppt slides: the good, bad, and ugly. It’s becoming increasingly common for small-caps to use .ppt slides as part of their quarterly calls. The good: particularly for highly technical companies or those with multiple KPIs, accompanying slides can be extremely helpful to investors.  The bad: don’t create a slide for every messaging point, instead use them only on an “as needed” basis, keep them word “lite,” and graphically simple. The ugly: if your earning call devolves into essentially reading slides to investors, you’re training investors that they don’t need to listen to you, and you’re also decreasing their confidence in you.

7. Poor extemporaneous speaking skills. Small-cap investors predominantly bet on jockeys, not horses. Accordingly, you need to speak as if your company and stock price depend on it.  Flawless, extemporaneous speech is really hard. When you’re good at it, investors take notice.  When you’re bad at it, investors take extra notice.  The rub? Most CEOs intuitively think they are good speakers.  But SCI asked a dozen seasoned small-cap investors: “Of the CEOs you’ve interacted with during the last year, what percentage were skilled speakers?“  Six said less than 50 percent of CEOs were skilled speakers, and the other six said less than 20 percent. More on this critical subject here.

8. “We have no plans to raise capital.” When this statement – which might be technically true when uttered – is followed up three weeks later by a capital raise, credibility with investors is going to be irretrievably breached.  While companies need to be guided by counsel’s advice to avoid any misleading comments, air on the side of reality and transparency when you’re able.  After all, investors know that small-cap companies raise $25+ billion of growth capital annually, and they can tell from your financial statements whether capital raising is in your future.

9. Failing to address concerns proactively. At any given moment in time, companies are apprised of key investor concerns.  When those key concerns are addressed proactively by management on quarterly calls it sends constructive messages to investors: (a) the company is listening to shareholders; and (b) the company always endeavors to transparently address investor concerns.  When companies don’t address those concerns proactively, and instead wait to be asked about them, it sends the opposite message to investors.

10. “Hogging the mic.” When CEOs don’t permit other executives on the call to speak, or continually preempt or interrupt them, investors will likely think the same thing: this CEO doesn’t trust or value their team, and neither should investors. Experienced CEOs actually do the opposite; i.e., they take every opportunity to highlight the strength and quality of their team.