Highly important and highly public, conference calls can be the most stressful events of the IR calendar. What’s interesting is that companies take such different approaches.
For some, the conference call has become routine, with a rote procedure to follow every quarter. Others are constantly trying something new. Some want as many people on the audio bridge as possible, others want to encourage participants to listen to the webcast instead. Some are happy to take all questions, while others like to have a degree of control over the Q&A session. Teleconferences have connected the world for a long time, but it seems the way they’re used is as varied as ever.
It’s not often that a natural disaster leads to a communications overhaul, but that was the case at Gulfport, Mississippi-based Hancock Holding Company, the parent company of Hancock Bank. Prior to Hurricane Katrina in 2005, the company, which was established in 1899, did not do any conference calls. In the aftermath of the disaster, however, the company quickly had to find ways to communicate with stakeholders.
‘Immediately after the storm, literally the only way I could communicate with people was face to face. There were no cellphone towers and no electricity,’ says Paul Guichet, VP of investor relations. In response to the disaster, the company relocated its headquarters to Baton Rouge and started to put a conference call program in place.
Crisis comms
‘Communication is paramount after any catastrophic event, and we had to let the investment community know how the company had been affected,’ says Guichet. ‘We conducted at least three calls in the couple of months following the hurricane.’ Hancock’s stock dipped by 5 percent on the first day of trading after the storm – since then, however, its share price has almost doubled.
Guichet says that despite the difficult circumstances and the novelty of conference calls, senior management handled the calls with ease: ‘We’re accustomed to being out on the road and addressing questions from the investment community so we were able to adapt to this new situation,’ he notes. An important factor in this was the positive attitude displayed on the calls by senior management: ‘The executives are all so personable, and that was evident on the conference calls,’ Guichet adds. ‘Their personalities really came through.’
After this teleconferencing success, the company is now considering implementing a permanent, routine conference call program. ‘We had been looking into initiating conference calls prior to the storm,’ says Guichet. ‘Katrina really accelerated this need.’
Solid preparation
Colorado-based technical information provider IHS Group is another newcomer to the world of teleconferencing, having done an IPO in November 2005. Since then the company has held two earnings calls. Like Hancock Holding, the company found its roadshow experience was excellent preparation for the calls.
‘We spent a great deal of the year prior to the IPO working on how we would position ourselves to the outside world and solidifying our message,’ says Jane Okun, senior VP of IR and corporate communications. ‘This meant that when it came to the conference calls, our messaging was very consistent, so we had great feedback.’
Okun adds that conference calls can in some ways be more challenging than in-person meetings, however. ‘If you’re in a one-on-one meeting and someone is looking confused you can stop and ask if they’re following you, but on a conference call you can’t read facial expressions or body language.’
To counteract this lack of personal contact, Okun says the IHS team worked on its prepared remarks for several weeks beforehand. ‘We had to be sure everything would be clear,’ she says.
IHS does a simultaneous webcast along with its conference call, and Okun explains that she encourages certain groups, such as employees, to listen to this rather than dialling in. The company does not broadly publish the dial-in number for its calls; instead, the number is included on Thomson’s online StreetEvents service and sent out to the company’sdistribution list. ‘This decision is based on a combination of cost and a desire to manage an orderly conference call that doesn’t get overloaded with people,’ says Okun.
Ready to go
‘We’re quite a diverse company geographically, so instead of dragging people all over the country for a half-hour meeting, we have instant conference call meetings.’ So says Darren White, telecoms category manager at UK-based Serco. These meetings don’t require any pre-booking, just a number (which can stay the same each time) and a pass code. ‘You can also set it up so just the leader has the pass code that starts the meeting; this way you don’t get charged when people have dialled in before and are just sitting around,’ explains White.
The meetings are ideal, says White, for having informal internal conferences or quick discussions with, for example, suppliers or project managers. ‘Sometimes there’s a variety of different stakeholders who need to be in a meeting,’ he says. ‘These conference calls are a great way of bringing disparate people together easily and cheaply.’
Internal participants use a UK number, clients use a toll-free number, and clients based overseas use a local number. White is involved in around four or five such meetings a month.
Recently, Serco has been promoting the use of this style of teleconferencing. ‘We just changed service providers and our new deal represents a cost saving of around 80 or 90 percent,’ comments White. There has been a resultant increase in the number of employees setting up conference call accounts. ‘We’re up to 200 so far, and we expect to see even more,’White adds.
Confident communication
Finnish-Swedish paper and packaging company Stora Enso arranges its quarterly calls about a year in advance, and about 100 people dial in each time. Despite this advance organization, plans sometimes have to change at the last minute. ‘The CFO had to carry out our most recent conference call by himself, as the CEO had to go on an unexpected trip to China,’ says Keith Russell, senior VP of IR.
Russell adds that the feedback was very positive: ‘Language skills play a role in how the whole conference call comes across. Often, the impression listeners are left with is down to the personality of the speaker. Management has to sound confident and not defensive.’
‘On a conference call, every word counts; investors literally hang on every word,’ Russell continues. ‘The most important thing is the quality of the answers to the investors’ questions – that’s what they’re listening for.’
Technical hurdles
For recruitment firm 51job, being based in Shanghai presents a few hurdles to a smooth teleconferencing process. ‘Telecommunications networks in China are unreliable, so I’m primarily concerned about the call being accidentally disconnected or having static on the line,’ says Linda Chien, director of investor relations.
As most of the company’s conference call listeners are based in the US, time difference is another factor Chien has to take into consideration. ‘We’ve experimented with different conference call times – early morning or late evening – to see what investors prefer, given the twelve to 13-hour time difference with New York,’ comments Chien.
These challenges mean having a reliable conference call provider is absolutely crucial. ‘Making a teleconference run smoothly begins with making sure we work with trusted and experienced vendors,’ says Chien. ‘Additionally, because our calls often occur outside regular office hours, I make sure we have a contact person we can reach immediately if there are any problems.’
The fine line
Over the past few years, the use of online tools to monitor call participants and the Q&A queue has dramatically increased. Companies now have the option of viewing names, titles, companies, and who wants to ask a question. This leads to difficult choices about whether to change the order of the queue, or even to bar certain individuals from asking a question at all. It’s a thorny ethical dilemma.
Off the record, some companies admit to putting ‘difficult’ analysts to the back of the queue. Most, however, insist that all questions are welcome.
The latter is an approach that Jonathan Boersma, director of standards of practice at the CFA Centre for Financial Market Integrity, is in favor of. ‘In recent history there has been retaliation against analysts with negative opinions, and companies have not allowed them to ask questions on calls,’ he says. ‘We want to do anything we can to stop that sort of situation occurring.’
Boersma adds: ‘When you have the ability to see who’s on the queue, it provides a tempting opportunity to prioritize certain questions and push the analyst with a
negative position on your stock down to the bottom. I hope people will resist that temptation, but I’m sure there are some out there who can’t.’
For Boersma, best practice would be not to ask for identifying information from people in the queue. ‘This would remove the temptation to be selective, and it puts the company in a better position to refute these accusations,’ he says.
Some companies, however, see value in controlling the order in which questions are taken. ‘We typically prioritize sell-side analysts so we have sufficient time to allow the covering analysts to address management,’ says 51job’s Linda Chien. ‘Beyond this, we open the call to anyone else as time permits.’
Raj Sinha, a London-based analyst with JPMorgan, points to a drawback of companies failing to answer all questions: ‘Sometimes an analyst could misunderstand a point, and it could be a negative point for them. If the company doesn’t give an opportunity for the question to be asked, and then give clarification, the analyst will just go and write a note telling investors about this perceived negative point.’
‘Ultimately, it will be more damaging to a company if it comes out that the company is not taking certain questions than if that company were to just take the difficult question in the first place,’ adds Boersma.
