Off the Record: Investors and Execs on Earning Call Scripts

7 minute read

Off the Record: Investors and Execs on Earning Call Scripts

By Small-Cap Institute

This is part of a new series where SCI will be speaking with experienced, small-cap investors and executives “off the record” about a variety of capital markets, corporate finance, and boardroom issues.

As we have emphasized elsewhere, small-cap investors predominantly bet on “jockeys” not “horses.”  All things being equal, a CEO who speaks well is going to garner more “bets.”  And though most small-cap CEOs innately understand the importance of communication, they often don’t appreciate how investors are evaluating them.  Earnings call scripts are a great example of this divide, and a place where small-cap CEOs can really distinguish themselves from peers with a bit of awareness and preparation.

The overlooked problem

Though investors know that most CEOs are reading from scripts during earnings calls, it erodes investor confidence when CEOs haltingly read a script as if they’ve never seen it before.

Many small-cap CEOs don’t appreciate that when their scripted remarks on a quarterly call sound amateurish, smart buy-side folks are all thinking the same thing:  the more this person speaks, the worse it is for me.” – Experienced small-cap fund manager

When you listen to practiced CEOs, you’d never know they were reading a script, which consequently inspires investor confidence.

Unfortunately, CEOs rarely if ever get investor feedback about their earnings call presentations, so they continue to assume that their preparation and performance are well received.  

This is very often a mistaken assumption. 

Some practical suggestions

We reached out to some of the highest performing small-cap CEOs we’ve interacted with and asked them how they deliver seamless prepared remarks on their earnings calls.  Here’s what they shared:

Who’s the authorAs several CEOs quite rightly pointed out, you have to start with who is writing the scripts.  That is, you need to spend some time with them to understand what they are trying to achieve, and whether you’re on the same page in that regard.  Also, not every investor relations professional is a great writer, or understands how to write content that’s intended to be read aloud.  You need to find both or you’re starting at a disadvantage.

Prepare, prepare, prepare.  Here’s how experienced CEOs “take ownership” of a speaking script:

  • Read the edited/penultimate script all the way through 2-3 times
  • Tape a full read-through on your phone
  • Listen to the taped version while following along with the script.  Make notes on the script in any places where the text doesn’t sound like fluid speech, and where pauses or emphasis would help.  You will be surprised at the areas you highlight, simply based on recorded read throughs
  • Edit the text to make it sound more like how you naturally speak
  • Keep practicing until the taped replays sound like you’re not reading from a script

Pace. We all innately know when someone is speaking too slowly or too quickly.  Unfortunately, when CEOs are nervous or unprepared, they often default to speaking quickly.  Cue the age-old footage of the fast-talking used car salesman, and you’ll have a great sense of how this impacts investor confidence.  So, make sure when you practice the script that you’re being cognizant of your cadence.  When it’s time for the “real thing,” several CEOs told us they sometimes write a word such as “PACE” or “SLOW” across the top of the script pages as a reminder, if they have a tendency to speak too fast.

Modifier-lite.  When less-experienced CEOs are genuinely excited about financial performance or a product, or they are defensive regarding underperformance, they tend to resort to modifiers versus facts (e.g., “We’re incredibly excited to announce a game-changing innovation…” or “I couldn’t be prouder of our incredible results…”).  Great public companies, however, stick to facts, and they let investors and customers supply the adjectives.  As one CEO told us, “If you watch great speeches on YouTube, you will learn a valuable lesson: the best way to make an important point is not with superlatives, but with short, factual sentences, and well-timed pauses.”

VenueEven great prepared remarks are going to sound horrible to investors if they are delivered in a room – or using a device – that has poor fidelity.  So, make sure you confirm what the broadcasted version is going to sound like, and avoid the following: rooms with hardwood floors, speakerphones, and low-quality headsets.  One CEO cautioned, “The simplest thing to do is default to land-lines and speak from carpeted rooms.”

Pre-record prepared remarksSCI is often asked whether companies should simply pre-record the prepared remarks segment of quarterly calls in order to better control the quality and avoid same-day jitters.  Our reply is always the same: if it’s going to be a better product, then… yes.  But that answer doesn’t change any of the preparatory advice, and it also doesn’t change the need to field the Q&A portion of calls from a location that doesn’t sound markedly different or worse than where the prepared remarks were pre-recorded.


Here are a few other points that investors and execs implored us to mention.

Plain English.  Particularly for small-cap life science and technology companies that are predominantly retail held/traded, circle every industry or technical term in your prepared remarks and ask yourself a question: would a typical nonprofessional investor have any idea what this word means?  When in doubt, just use plain English; it will dramatically increase your company’s communication effectiveness.

What on earth does your company doInvestors are constantly amazed – and not in a good way – how few small-cap CEOs spend several sentences at the beginning of each call succinctly explaining what the company does.  Quarterly calls aren’t just open to existing investors; there could be potential partners, potential new investors, media, regulators, and others on the calls.  As one experienced investor mused, “Why would you miss a phenomenal opportunity to educate everyone for 90 seconds about what the company does, and why it’s compelling?”

Safe harbor ad nauseam.  Though the dreaded safe harbor isn’t officially part of the CEO’s prepared remarks, it nevertheless draws the ire of many. Be smart: ask your counsel for the absolute minimum that they are comfortable with.  Put differently, when your company’s IR professionals are forced to read a safe harbor that goes on for minutes, it’s not sending the message you want to investors.

Final thoughts from an investor & CEO

One well-known small-cap investor we spoke with put it this way: “We only hear directly from CEOs a few times a year, so it’s confounding that so many small-cap CEOs seem to prepare less for those interactions versus more.  The difference between the CEOs who are prepared and those who aren’t is literally night and day.” 

And an experienced CEO told us: “Investors listen for a living.  They will know immediately if your remarks are unrehearsed.  Immediately.  What kind of message does that send?  Like many things in life, a little preparation goes a long way.”