As we have stated in multiple blogs, quarterly earnings calls are possibly the most important form of communication that companies have with the investment community. With the advent of Regulation Fair Disclosure (Reg FD), the earnings call is an ideal opportunity for management teams to avoid selective disclosure and provide company information to all investors at the same time. Because of the importance of these calls, investors now expect corporate management to not only provide a quarterly financial update, but also offer business updates.
Over the past several years, many mega and large-capitalization companies have started incorporating PowerPoint slides into their quarterly earnings reports and conference calls. While adding a presentation to an earnings call can help alleviate some investor questions, should every public company utilize this tool?
Below are some of the pros and cons of quarterly earnings slides.
Pros of Quarterly Earnings Slides
- The financials are clearly displayed. A quarterly earnings presentation will typically include quarterly financials and company-specific metrics. Having these numbers in a presentation allows investors and analysts to concentrate on what management is saying instead of spending a large portion of time writing down financial measures and metrics. While there are several services available that can transcribe earnings calls for you, they typically take several hours to have the “revised” transcripts available.
- Reconciliation between GAAP and non-GAAP earnings. All public companies in the United States are required to report quarterly earnings according to generally accepted accounting principles (GAAP) developed by the Financial Accounting Standards Board (FASB). Through acquisitions, corporate restructurings, etc., a company’s “true” quarterly performance may not be represented by GAAP reporting. The Securities and Exchange Commission (SEC) allows public companies to report non-GAAP measures as long as these companies report comparable GAAP financial measures and a step-by-step reconciliation of the two reporting methodologies. While these measures and their non-GAAP to GAAP reconciliations must be included in the quarterly financial statements, a quarterly earnings slide deck that includes an earnings reconciliation can be very helpful to investors.
Cons of Quarterly Earnings Slides
- You will likely set a precedent. Investors like quarterly earnings presentations because they help ease the burden of listening and note taking during earnings conference calls. Unfortunately, once a company begins down the path of supplying a quarterly earnings presentation, investors will expect one every quarter.
- Metrics. As stated above, earnings presentations typically contain quarterly business metrics. Companies should be very careful about which metrics should be given as investors will expect to see them each quarter.
- Creating a slide deck can be time consuming. Putting together a quarterly earnings PowerPoint slide deck takes time, and adding another “to-do” to a quarterly earnings cycle may be too difficult for some smaller companies.
Supplemental quarterly earnings presentations are appreciated by investors and analysts because they consolidate important financial measures into one, easy-to-read document. It is possible that adding another document to the financial reporting cycle could put an unnecessary burden on some companies. However, as companies become larger, offer more products, or make acquisitions and divestitures, having a concise earnings presentation can be very helpful in understanding the “true” financial state of a company. If your team is looking for guidance in creating a quarterly earnings presentation, or simply looking for advice on strategy for a slide deck, we’d love to help. Contact Gilmartin today to get started.
Greg Chodaczek, Managing Director