1. Deciding to do it
Companies aren’t necessarily born with the will or the skill to do conference calls. Softchoice, a fast-growing Canadian technology company, went public in 2002 in a reverse takeover. With limited liquidity and little coverage at first, Softchoice only began doing conference calls this year.
‘It’s part of our evolution,’ explains CFO Anne Brace. ‘Our IR calls are part of a much broader IR strategy that starts with the MD&A and moves on to relationships with analysts and institutional investors.’
The MD&A’s aim is to present the company through the eyes of management, and Brace ascribes the same goal to the conference call. Her other main goal is consistency: ‘Our MD&A, press release and conference call follow a consistent format every quarter, so analysts get the same information regardless of whether results are good or bad,’ she says.
For Softchoice’s first call, Brace and CEO Dave MacDonald did a complete rehearsal. Now they’re confident enough to do just a quick run-through of the script and slides. Neither executive has had any special presentation training, and the pair rely on each other for feedback. ‘One time Dave spoke too fast,’ Brace says. ‘Another time I sounded too much like I was reading.’
To avoid ‘sounding read’, Brace recommends looking away from the script and extemporizing a little at the beginning or end of each paragraph – ‘To recap…’ or ‘What I mean is…’, for example. She also confides that these days her scripts have ‘SLOW’ scrawled across the top in big letters.
2. Choosing a provider
Dennis Halpin, IR director at Wheeling-Pittsburgh Steel Corporation (WPSC), had an epiphany at a Niri conference a few years ago when an equity analyst talked about his biggest IR peeve: a web site with no real information and lousy navigation. ‘I felt like he was looking straight at me,’ Halpin shudders.
Right then, Halpin resolved to overhaul WPSC’s web site – and while he was at it, make sure his company had the best possible conference calls and webcasts. Earlier this year, after an extensive selection process, he engaged new providers.
Price and quality were Halpin’s watchwords as he approached the half-dozen top conference call providers with a long list of questions. Like Lieutenant Columbo, he played dumb to find out the truth about his target providers.
Halpin settled on a new provider that met his criteria just in time for WPSC’s most recent earnings announcement and a conference call fraught with tension. On the table were a hostile takeover bid from Esmark and a proposed friendly merger with Brazil’s CSN. ‘Given the sensitivity of the agenda, I was still extremely comfortable with our new provider,’ he concludes.
3. Doing research
WPSC has the benefit of hindsight because it’s one of the last steel companies to announce earnings each quarter. In the weeks leading up to his own call, Halpin listens to almost every other call in his sector. ‘I get to hear what other steel companies say in terms of forward-looking guidance and raw materials pricing. Also, it’s usually the same people asking questions, so I get an idea of what our own Q&A is going to be like.’
Halpin compresses a huge amount of information into an executive summary for senior management, including a table showing competitors’ financials next to WPSC’s. He digs into transcripts to summarize themes, guidance and market conditions. ‘I cherry-pick the highlights,’ he says.
Xcel Energy in Minnesota has a lot more peers to keep an eye on – around 40 utilities – and a lot less time in which to do it than WPSC. But IR director Paul Johnson still manages to listen in on a half-dozen calls, or at least read the transcripts. Later, during Xcel’s call, he can see the Q&A queue online and can usually predict the questions certain individuals will ask. ‘The quarter’s issues and themes usually follow a general direction, and that works its way into our sessions with our CFO and our Q&A document,’ Johnson says.
Xcel’s Q&A document is a Word file around 30 pages long that Johnson and his boss, managing director of IR Dick Kolkmann, update every week. ‘We give it to senior management before the earnings release and any time we’re going out on the road to meet with investors and analysts,’ Kolkmann says.
4. Measuring success
First thing after the call, it’s wise to take a look at the stock price. Kolkmann remembers a call in Q2 2002 when an Xcel subsidiary was having problems. Halfway through the ‘spirited’ call, assistants rushed in with notes from the NYSE asking why the stock price was dropping so hard. ‘Fortunately, we recovered,’ Kolkmann says. ‘The stock price is definitely an indicator, and our CFO likes to keep track of what happened during the call.’
Kolkmann and Johnson then go back to their office and wait for follow-up calls to come in. Later, they give the CFO a summary of their conversations.
At Adobe Systems, IRO Mike Saviage and the company’s senior management also measure the success of their conference call by looking at press reports and sell-side research notes. ‘Are the headlines and main takeaways what we were hoping for?’ Saviage asks. ‘What question was asked that Mike didn’t prepare us for?’ the CEO and CFO joke – Saviage proudly notes that they can rarely think of one.
