In February, Standard Chartered Group videotaped and webcast a 20-minute interview with CEO Mervyn Davies. An outside professional peppered Davies with the types of tough questions investors might ask at the semi-annual earnings call, scheduled for later that day. ‘For analysts attending the meeting, we hoped to address some of their questions before they even got there,’ says Aman Narain, investor relations manager for the London-based financial institution. ‘It was a good opportunity for investors to get a close-up view of Mervyn.’
For Standard Chartered, webcasting is a way ‘to reach out to people who previously would not have gotten results live,’ says Narain. As hoped, a large percentage of webcast viewers reside outside the UK, with attendees tuning in from the US to Hong Kong. Companies courting an international shareholder base know that logistics can cause headaches. In order to attract global investors, Standard Chartered holds simultaneous final and interim earnings result conferences in Hong Kong and London, but it makes the archive available, too, so any investor can hear the proceedings regardless of time zone.
Audio-only earnings webcasts may be the norm in the US, but the UK has been far bolder about experimenting with video, say observers. According to a new survey, 64 FTSE 100 companies are currently using video to enliven their IR webcasts. Although video is clearly the most impressive offering out there, Standard Chartered didn’t want flashy features to outstrip useful content on its webcasts; Narain made sure that Davies’ interview was accessible to investors who lacked a broadband connection. ‘The interview was offered in audio, video and text to accommodate broadband and narrowband viewers,’ he says. ‘We wanted to ensure that the interview was available to anyone with a 56K modem.’
Outside the IR world, webcasts are garnering a great deal of attention. Earlier this year, George Bush webcast his state of the union address, and in 2000, Victoria’s Secret webcast a 44-minute fashion show that drew over 2 mn viewers and was blamed for $120 mn in lost productivity as people across the US tuned in to watch lingerie models during the work day. But while IROs everywhere are webcasting earnings calls, the affairs are still fairly ho-hum.
By and large, IR earnings calls have a cookie-cutter sameness to them. Most last around an hour. ‘If it moves beyond an hour and 15 minutes, people get a little cranky,’ acknowledges Bill Steglitz, manager of investor relations for Allmerica Financial, an insurer based in Worcester, Massachusetts. Although most webcasts are thrown open to any and all attendees, a sizeable number still restrict web attendees’ participation, denying them the ability to ask questions by placing them in listen-only mode.
And in spite of early and enthusiastic predictions, audiences for these events have not grown dramatically – if they’ve grown at all. The number of attendees seems to depend on the company itself. Allmerica has roughly 100 webcast participants for a typical earnings call, up from 40-50, according to Steglitz. But Robert Burrows, IRO for Gene Logic in Gaithersburg, Maryland, says attendance has declined. He attributes the drop to the sell-off in biotech stocks, coupled with the fact that genomics is a daunting subject.
It seems there is a finite audience for IR events. ‘I’d imagine that participation will probably level off at some point,’ says Lawrence Orans, senior analyst at Gartner in Stamford, Connecticut. ‘After all, how many people are interested?’
Even without staggering numbers, webcasts can be a way of identifying new followers. Silvio de Carvalho, executive director at Banco Itaú in Sao Paulo, Brazil, has been webcasting IR earnings calls since 1999. As of the end of March, Banco Itaú had conducted 24 webcasts – twelve in English and twelve in Portuguese. Roughly 45 investors, analysts and journalists tune in for each of the two webcasts, with many of the attendees returning time and again, according to De Carvalho.
Mixed reviews
Outside the US where Regulation FD isn’t in effect, webcasts are not ubiquitous. Larger companies or those hoping to attract investors abroad tend to webcast earnings announcements while the rest have remained contentedly on the sidelines.
Susan Herman, executive vice president at Christensen & Associates in Scottsdale, Arizona, says Canada’s 183 dual-listed companies are naturally ‘attuned to whatever’s happening in the US,’ but the remaining 2,000-plus aren’t so concerned about Regulation FD.
Latin American companies ‘tend to be very skeptical’ about webcasting, says Isabel Vieira, vice president in Thomson Financial’s corporate group. Of around 22 Latin American clients that have retained the services of Thomson, she estimates only five companies regularly webcast earnings calls. ‘Many,’ she explains, ‘don’t see a return for the cost. Right now, it’s just the major companies doing it.’
Asian companies hoping to overcome logistical challenges and attract investors in far-flung places have begun webcasting, but they’ve discovered that the technology is no cure-all. Mary Meloto-Holness, an account executive for Thomson, says Asian companies ‘trying to court investors in the US, where the time difference is just ridiculous, have a tendency to webcast,’ but most of the attendees still reside in Asia.
Widening a company’s reach is an oft-cited reason for webcasting. Because many of its investors are in the US, Petrobras, the state-controlled oil company in Brazil, webcasts two earnings release calls – one in Portuguese and one in English, according to IR executive manager Luciana Rachid.
‘It’s always been easy to reach Brazilian investors and give explanations,’ she says. ‘In Brazil, immediately after the board meeting when results are approved, we have a press conference. Everyone can attend,’ she says. Just the same, the webcasts generate the most buzz locally. Some Brazilian analysts even attend both the English and Portuguese versions of the event, says Rachid, adding, ‘They don’t want to miss a single word.’
Many believe regulatory support for webcasts may soon increase worldwide. In the UK, for instance, the FSMA (Financial Services & Markets Act) has increased the penalty for incorrect dissemination of investor information, making it a criminal offense instead of a civil one. But even without external pressures, some companies are simply attracted to the fairness and breadth of the medium. ‘Webcasts are more democratic and open for everybody,’ enthuses De Carvalho.
New wrinkles
Given that audiences tend to consist of domestic citizens, the real reason to webcast may be to furnish attendees with a little something extra to hammer home the message. Today, more than half of all webcasts boast enhanced features, say industry observers. Gene Logic’s Burrows says webcasting without PowerPoint slides simply doesn’t appeal to him. ‘Why would you use the speakers in your computer for just audio when you have a phone that has far better audio capability?’ he asks. Charts, bullet points and photos can enhance the presentation by providing a visual component and emphasizing key facts.
Written transcripts of webcasts seem like a logical next step, although the idea has been slow to take hold. ‘It’s almost as if there’s a fear factor with putting up the transcript,’ says Herman. ‘Maybe it makes it too easy for people to catalogue your words and keep them on file.’
A new and promising idea is for companies to summarize their earnings calls, hitting just the high points. ‘For an investor with a portfolio of a dozen companies, it’s really nice if you can get a quick summary of what’s been said on the call,’ observes Herman.
The crème de la crème of all extras is certainly video, and yet the reaction to this use of multimedia by many American IROs has ranged from skeptical to outright scoffing. ‘An earnings call isn’t that interesting,’ says Brian Arsenault, who heads IR at Banknorth Group in Portland, Maine. ‘It would just be four guys sitting around a desk talking into a phone. Why would anyone care? It’s not like we could show home movies.’
Meanwhile, there are those that remain on the fence as they investigate the medium. Stewart Lawrence, investor relations manager for Houston-based Anadarko Petroleum, is considering incorporating video clips of drilling operations into webcast investor presentations. ‘We want to be cutting-edge and give investors the best show that we can,’ he says.
For many IROs, the technical limitations of video are too great to justify the cost. It takes 300 kilobytes per second of bandwidth to approach VHS quality reception, according to Gartner’s Orans. ‘Within a campus LAN environment, there’s plenty of bandwidth. It’s not an issue,’ he says. ‘But for people listening at home, dial-up is still 56K.’
Banco Itaú’s De Carvalho says he’ll consider video in the future, once the technology evolves to the point that attendees can get high quality picture and sound on their computers.
Cost is another deterrent. Petrobras’s Rachid worries the added cost of a video webcast could turn off investors: ‘Some investors in the post-conference analysis have had a concern about how much webcasts cost and whether they’re necessary. If we did a video webcast, they would be even more concerned.’
Should video catch on, Orans speculates it could transform the dynamics of IR communications – much as the Kennedy-Nixon debate altered politics back in the 1960s. ‘You could make an argument that CEOs who are more adept or photogenic could use this medium to their advantage,’ he says.
Already, some companies like Standard Chartered are embracing video as a way to exploit a strength. ‘Our CEO is a confident man,’ says Narain. ‘He’s comfortable with the medium and the interview worked well.’ Ditto for Diageo, the London-based beverage giant, which has been using video in its webcasts since September 2000, according to Isabelle Thomas, corporate communications manager for Europe. Diageo’s executives are professionals, says Thomas: ‘They do webcasts very well and very gracefully.’
New formality
When open conference calls were still just a gleam in former SEC chairman Arthur Levitt’s eye, IROs argued webcasting would turn investor events into ugly brawls or exercises as tedious as an Investing 101 class. Most of these fears have proven groundless. ‘Whether people are intimidated by asking questions on the call, I don’t know, but we haven’t had a lot of people asking, What’s genomics?’ says Gene Logic’s Burrows.
That said, for many IROs, the Q&A now feels like taking an oral exam. ‘If you talk to investor relations people a few weeks before the earnings call, they’re working on preparing for the Q&A,’ says Herman. ‘The ones I’ve seen have binders two or three inches thick.’
Burrows notes that the questions asked can be more pointed than in the pre-FD world. For instance, Gene Logic ‘received one question from a member of the media that was a contentious issue, relating to our former use of Arthur Andersen.’
For better and for worse, the relatively informal and sometimes freewheeling conversation that was the conference call of old is now far more carefully planned. ‘Webcasts have added formality to the process,’ observes Christensen’s Herman. ‘There was a time when you didn’t have to be scripted; it really was a call where the CFO or whoever was the leader wasn’t as prompted or prepared.’
Technological solutions that remove some of the element of surprise are just now appearing on the scene. Burrows has synchronized the webcast PowerPoint presentation so that he is able to control the order in which slides are viewed. For Gene Logic’s quarterly call at the end of April, Burrows says he’ll dial into the conference call bridge and see exactly who’s accessing the call. Soon, he’ll know who’s queuing up to comment, and he’ll ultimately be able to reshuffle the order of incoming questions. ‘If I see that a member of the media is first in line, I can put that person second or third just because I want to have my star analyst talk first,’ he says. ‘The questions are going to be asked anyway, but it’s additional control I have.’
Even the process of issuing invitations requires greater forethought since a potential faux pas cannot be overlooked. Companies are drafting press releases about earnings calls and distributing them well before the event is scheduled to take place. ‘The SEC has cracked down on companies notifying folks of a webcast the day before it happens or the morning of,’ says Burrows. He informs investors of webcasts at least three weeks in advance.
Branching out
Increasingly, IROs are webcasting more than quarterly earnings announcements. Companies are broadcasting annual meetings, investor days and conference presentations online and later archiving them on their IR sites.
On January 6, when Anadarko announced its revised business strategy, Lawrence webcast the presentation made in Manhattan. ‘For momentous occasions, it’s a great tool to use to make sure everybody has real-time access to the information you’re giving,’ he adds.
Webcasting fever has left some IROs scrambling. Concerned about falling behind the curve, Arsenault is considering webcasting Banknorth’s annual meeting: ‘It’s one of those things that develops quickly, and all of a sudden we’re all saying, man, maybe we ought to consider doing that.’
When timed strategically, webcasts can allay investor fears before they mushroom into full-blown crises. Petrobras’s Luciana Rachid says ‘whenever there’s a question relevant for the market, we do a webcast to discuss it.’ So far, she has webcast presentations about a new tax law, downstream deregulation and international acquisitions. She maintains that webcasts are ‘very effective in clarifying doubt.’
Heightened attention concerning transparency means that IROs may soon be webcasting whole new categories of information. In December, USA Networks disclosed its internal operating budget through 2003. Although the company offered no interim comments, it’s easy to see how a development like this may lead to IROs making – and webcasting – major announcements outside the traditional quarterly earnings framework.
Of all the changes on the horizon, the most sweeping could be technology-based. Some webcast providers are looking to XBRL – the new financial-reporting standard that defines common schemas for routine tasks or functions – to change the very nature of earnings calls. Curt Anderson, IR director at Microsoft, which released its second quarter earnings numbers in XBRL earlier this year, says this reporting language lets analysts and investors feed information into their models or spreadsheets and then make meaningful comparisons almost immediately.
XBRL, predicts Anderson, ‘will enhance the quality of questions and the conference call process because the information will be more readily available and more easily digested from an analysis perspective. I think it will change the quality and depth of questions we get, and the speed at which we get them.’
As the technology matures and companies continue to contend with a tough economy, many IROs are biding their time, producing plain-vanilla webcasts while they await larger budgets and a renewed willingness to take risks and test drive the next new thing.
Even in an era of uncertainty, no-one’s questioning the importance of IR webcasts. It’s now a truism that the internet will play an increasingly important and, perhaps, ultimately crucial role in the future of earnings releases and other IR-related announcements. ‘We’ll be using this medium more and more,’ concludes Diageo’s Thomas. ‘It’s the way forward.’
