Earnings conference calls

An earnings conference call is used by public companies to discuss their financial and operational information with the investment community. In these calls, a presentation team discusses recent financial results, issues guidance regarding expected future performance, and responds to questions. The calls are intended to expand upon information already released in a company's quarterly or annual financial statements.

The primary participants in the earnings call are the CEO and CFO. They discuss all of the financial and operational results and projections (if any) of the business. The investor relations officer (IRO) may be involved in the introduction to and conclusion of the earnings call, but otherwise operates in the background or as a discussion moderator.

The earnings call is normally scheduled for a date immediately following the release of a company’s quarterly Form 10-Q or annual Form 10-K filing. Notice of the call is made by press release to gain the widest distribution, but can also be by e-mail to ensure that analysts and key investors receive timely notice.

Earnings calls are usually handled by third party conference calling services that set up phone lines and handle the queue of callers who have questions for the management team. They also typically provide a recording of the entire call; consider posting this recording in the investor relations section of the company website, so that those unable to attention the call can still listen to it at a later date. These posted recordings are usually taken down once a reasonable period of time has passed, so that investors are not listening to out-of-date earnings calls.

The earnings call is normally divided into two sections, with the first part being a prepared set of remarks about the company’s results, while the second part is set aside for a question and answer session with whomever is listening to the call. The call begins with the IRO introducing those employees who are participating in the meeting. The IRO reads a boilerplate safe harbor statement and then hands off the meeting to the CEO. The CEO will personally address most of the material to be presented, with the occasional participation of the CFO to discuss more detailed financial topics. If the company provides guidance regarding its expectations for future results, this information is added after the discussion of the company’s historical results.

The first part of the call follows a baseline script that is used repeatedly for all of a company’s earnings calls. The scripted part of the earnings call should not last longer than 30 minutes.

Following the prepared statements in the first section of the earnings call, the CEO returns control of the meeting to the IRO, who acts as the moderator for the question and answer session. Participants in the call state their questions, and the IRO directs the question to the most appropriate person.

It may be useful to occasionally call back some of the participants in an earnings call for their comments about how the call was managed and whether its contents should be altered in the future. If the participants have cogent comments, relay them back to the earnings call presenters to see if they want to alter the earnings call format in the future.

Related Courses

Investor Relations Guidebook 
Public Company Accounting and Finance