The quarterly conference call is set, the webcast service is ready, and you’re about to deliver the opening disclaimer. Analysts will speak their mind in the Q&A session, but what about reporters? Will you take questions during the call or arrange discussion afterwards, increasing the time reporters need with upper management and possibly duplicating work?
Different companies have their own ways of handling press on earnings calls. What they have in common is a need for press exposure to get their stories out to investors while knowing they may have to educate – and engage in damage control.
Corporations used to limit earnings call participation to analysts and large shareholders. ‘That changed with Regulation FD, where you couldn’t preclude people from the call,’ says Andrew Edson, who runs an eponymous IR and PR firm in New York. ‘But that didn’t mean you couldn’t preclude them from asking questions.’
Richard Ramlall, senior vice president of strategic and external affairs at Virginia cable and telecoms company RCN, has reporters hold questions until after the call ‘rather than take up time during earnings calls for investors and analysts who have a very short time frame.’
It’s also a way of adding some control to the conversation, according to Edson. ‘A company doesn’t want to turn this into a press conference,’ he explains. To that end, the IR department can check the registrations of those looking to ask a question to stop reporters from slipping in.
Michael Stanton, vice president of IR and global treasury at Washington, DC-based educational software firm Blackboard, under-stands why many IROs are concerned about talking to reporters during a call. ‘The biggest potential downside is probably a reporter asking questions that are more appropriate at a briefing,’ he says. In fact, he’s spoken to reporters so poorly prepared in finance that he ‘might as well have been talking another language.’
Common mistakes
The result can be a complete misinterpretation of a number or situation that unfairly makes the company look bad to investors.
Unfortunately, mistakes are common. Joan Bates, director of IR at DeVry, a Chicago company that runs technical schools, estimates that only one in five full-length financial news articles is error-free. ‘They don’t count enrollments correctly, or they take something you said and twist it,’ she says. It’s not malicious, but in the time pressure of an earnings call, management has little time to head errors off before they happen.
Yet Bates is not, in principle, averse to taking reporter questions during an earnings call, and Stanton allows journalists to ask questions in the Q&A session. ‘You’re giving them equal footing with any institutional investor or analyst,’ he says. ‘I’ve had reporters tell me before that they really appreciate having the same opportunity, whether they choose to ask a question or not. ’
Furthermore, reporters often travel. If one has a question but is available only during the call, ‘that’s another means for him or her to access the information on a timely basis,’ Stanton explains. That’s a benefit to the reporter and helps build a strong relationship. Some can’t even wait for the call. If the earnings release goes out after the markets close at 4 pm, Blackboard may start scheduling interviews with wire reporters, who face deadlines, from 4.01 pm.
News digest
Problems almost never come up because reporters rarely ask questions during earnings calls. ‘We’ve had trade reporters on many of our calls and they’ve never asked a question,’ says Ria Carlson, chief strategy and communications officer at Ingram Micro, a California IT company.
There are various reasons for reporters to hold off an interview until after the call. ‘I think they just prefer to sit back and try to digest what’s coming out,’ formulating questions for a later interview, suggests Bates. Then there’s the issue of competition among reporters. ‘If you’re from the Washington Post and Ben’s on the phone from the Washington Business Journal and you think you have an angle, you may hold it back and ask directly after the call,’ Stanton says.
So the majority of reporter questions will come after the call, and someone will need to answer them. Ingram Micro splits the calls, generally with the CEO talking to the general business press, whose questions tend to be strategic, and the COO handling the trade press, which often focuses on more operations-oriented topics.
In fact, the company welcomes the opportunity to match C-level managers with reporters because this provides an important media opportunity. Major outlets such as the Wall Street Journal, Forbes and Fortune cover thousands of companies and may not be interested in the average earnings call, ‘but they may be interested in having the CEO for a few minutes,’ Carlson points out.
It’s vital to have the reporters prepared, however, because management time is limited. Carlson sends general background information to reporters new to covering the company, just as she would for a new analyst.
Keeping tight control over when interviews begin and end is also critical. For example, Bates estimates that at every quarterly call she has only one hour of each manager’s time to split between oncamera and telephone interviews.
When you consider that all this preparation and coordination helps keep the media on your side and off the question line, however, it seems a small price to pay.
