By Scott Westcott
Back during my days as a newspaper reporter there were times just after a particularly frantic midnight deadline when a rumpled veteran editor was fond of muttering… “Well, If the paperboy misses the porch this was all for naught.”
The comment typically got a knowing nod and chuckle. Anyone who has ever committed considerable time and effort into a project only to see it fall apart in the final stage of execution can relate to the image of a waterlogged newspaper mired in the front shrubs.
That memory came to mind recently as first quarter earnings season began. It struck me that too many public companies end up missing the porch when it comes to reporting their earnings results. It’s a bit dire to say the miss nullifies the hard work achieved during the quarter – good fundamentals and strong earnings will typically generate a positive reaction, and vice versa. Yet by failing to tell the quarter’s story in a compelling – or at least instructive fashion -- companies miss a prime opportunity to bolster their reputation and value in the eyes of current and prospective investors, as well as analysts and the financial press.
Too often, the quarterly results are merely dumped into a press release -- a collection of numbers devoid of explanation and offering little context. It’s understandable how and why this happens. Some companies choose to just adhere to required disclosure regulations and don’t issue a press release at all. In other instances, a time-pressed CFO figures that the numbers alone are sufficient or that simply cut-and pasting the numbers into a press release template is how it’s always been done.
I’ve also heard the argument that this approach can be a benefit when the results are less than favorable, and management would prefer that the story of the quarter be better left untold. This logic doesn’t usually hold up. While bad news isn’t always easy to deliver, in most instances a less-than-favorable situation benefits from insight explaining what happened and why. Smart investors and analysts respect clarity and honesty, and may cut some slack to a company that appears to have a good handle on its challenges and how to address them.
Further, any analyst or financial reporter worth his or her salt will swiftly unearth the real news anyway, regardless of how muddled or mundane the press release. You might as well do your best to frame the story in the most positive way possible.
Of course, when the financial results are good – which they have been for many companies over the last several quarters -- an earnings release and supporting messaging that offers a narrative of that quarter offers clear benefits. Beyond providing valuable context and the forum to acknowledge challenges, you can build trust and confidence in your management team’s ability to create ongoing value. You also stand a better chance of introducing your stock to new audiences and potential investors while generating and facilitating analyst and media coverage.
Beyond that, developing a process to identify the story behind the numbers each quarter provides the framework for a more engaging earnings call or media interviews that are consistent with the theme of your press release and also aligned with your broader strategy. That creates greater consistency and authenticity with both prepared and unscripted remarks. Over time, this approach can also provide the content and context for compelling investor day presentation where there’s ample opportunity to tell your company’s full story.
Here’s the bottom line: In the increasingly noisy and competitive investor world, every company should be looking for ways to distinguish itself from the masses. One way to start doing that is to view each quarter as a unique chapter in the company’s evolution. By framing financial results in a strong narrative you gain a deeper understanding of how your company is progressing, while providing perspective that over time will build confidence in inventors, analysts, customers and employees.
You’ve done the hard work delivering profitable results and crafting a strategy that promises a prosperous future. Now just make sure you hit the porch by letting investors know the story and strategy behind the numbers.