Financial results announcements can have a meaningful impact on stock price and analysts’ sentiment, particularly for well-followed large caps and profile sector specific stocks. For publicly traded companies on major exchanges, the SEC requires a 10K (annual) or 10Q (quarterly) filing. But what adds color and context is the optional–yet highly used–conference call following the earnings release. In fact, one survey showed that more than 80% of publicly traded companies in the U.S. host a quarterly conference call to discuss results. Additionally, our research shows that in the Med Tech/Diagnostics sector, more than 90% of the publicly traded companies across all market caps host regular conference calls to discuss their quarterly results.
For a routine quarter, we suggest preparing remarks using the general outline below:
The conference call service will offer generic language and instructions for the call, or you can email specific language directly to the service provider in advance of the call or email the operator directly once you have initiated the call.
Forward Looking Statements
Your legal counsel should initially write the required Forward Looking Statements language provided before the discussion of the results and guidance begins. The statement doesn’t need to be long, but it should be updated and reviewed each quarter for relevance to cover the specific language that cites forward looking commentary.
Most often, the CEO kicks off the call welcoming attendees. He/she can offer an agenda for the rest of the call that includes upcoming speakers and material covered. While not required, it does provide the audience with queues to listen for along the way.
Mission statement, operational goals, key metrics
In a routine quarter, we advise that the CEO’s prepared remarks begin with a reminder of the company’s mission statement, operational goals for the year, or other metrics that have been publicly discussed as performance objectives. This sets the stage – or an outline – for the content that can be repeated each quarter. It’s important to note that there is no harm in repeating certain key messages quarter after quarter. While it might seem redundant to you, keep in mind that your audience is likely listening to multiple calls a day and may not be entirely up to speed on content shared in prior calls.
Recent highlights: operational and financial (high level only)
Next up, provide a brief summary of the most topical or recent operational highlights. There’s no need to repeat the contents of every press release issued since the last call, but it is important to capture the activity of the prior three months to demonstrate operational traction and bracket the contents. Also use this time to cover details on recent events, even if they happened subsequent to quarter close. For a year-end call, a very brief summary of the year’s highlights is often a good reminder of earlier events that set the stage for subsequent quarters. It might even be useful to note a significant event that impacted the comparable quarter in the prior year, such as an acquisition, financing activity, or product launch.
Deeper dive into key operational highlights
Here’s the meat of the script, but again, no need to cut & paste text from press releases. This is your opportunity to provide color around operational progress in the quarter and what it means to the business going forward. This is also a chance to discuss events in the quarter that didn’t necessitate a press release, but would be helpful for your stakeholders to know. It’s also a chance for the CEO to share his/her enthusiasm for recent events or to put into context something that perhaps didn’t go as planned.
Remember to reference back to the stated objectives for the year and note meaningful updates against those objectives. You may not have updates on each objective every quarter, but consider using this section of the script as a reminder that the company still sees it as a priority and is making progress. The absence of commentary on a stated objective may signal that it is no longer such.
Upcoming events of note
Do you plan to attend a major industry event, tradeshow, or panel presentation? Do you have an update on the clinical trials status or FDA approvals in process? Use this section to signal what investors should be expecting in the next quarter. Put things on investors’ radar without disclosing anticipated outcomes or pigeon-holing the company into a timeline or additional guidance.
Reminder of milestones and goals
We encourage the CEO to close his/her remarks with a summary of the important factors impacting the business. This can be brief, but should provide some visionary language that supports long-term goals as well as the company’s mission statement.
Quarterly financial review
Unfortunately, this section of the call is often a regurgitation of press release contents and 10Q MD&A, but it doesn’t have to be. As you review the P&L (we suggest including revenue, gross margin, OPEX, EBITDA or net income, and EPS) and balance sheet highlights, be sure highlight significant or unexpected trends. This section also gives you the opportunity to mention tracked metrics such as shipments, geographic mix, FX impacts or other macro and seasonal events that have an impact on your results.
The financial section offers the opportunity to describe one-time events, mix shifts that impacted outcomes, or important highlights from a financing activity. On a recent call, a CFO used his comments to drive home how a restructured debt facility was a real long-term win for them – details that didn’t easily translate into the previously filed 8K. Had he not done this, investors may have missed important points.
Also use this time to discuss one-time events that occurred in the quarter such as capital raise, debt facility, and option grants, among other topics.
If you are providing guidance for the first time, or if there are no changes to previously stated guidance, say as much. Or if you are making changes to previously stated guidance, provide the prior guidance and rationale for the change. Do the math for your listeners and make it easy for them to follow.
CEO Closing Remarks (optional)
Some management teams like to close the call with a thank you from the CEO and allow him/her to officially open the call for questions. Others are ready to move on with Q&A. We don’t have a strong opinion here, but if you do decide to turn the call back to the CEO, have the CEO summarize the highlights and close the formal remarks.
A Final Note on Word Count
In an effort to provide a baseline for word count, we researched the prepared remarks from earnings call scripts of 55 publicly traded med tech and Dx/Tools companies across all market caps. The word count ranged from as high as 4,700 to as low as 1,400. On average, most prepared remarks (including forward looking statements) were in the 2,800 word range and were completed in an average of 20 minutes.
Leigh Salvo, Managing Director