Learn the key elements of an effective investor communications strategy.
The earnings announcement is an excellent window for a company to reiterate its operational and financial performance to the market in a comprehensive and transparent manner. How do we optimize the quarterly and annual earnings announcements to boost investor confidence and let our stories be heard? Here are a few things that you can keep in mind while preparing the IR materials for the next earnings season.
Address recession instead of avoiding the topic.
In the wake of the geopolitical tensions and market chatters of the world economy heading for recession, as well as big companies lowering guidance, markets have shown that the importance of keeping an ongoing dialogue with investors has peaked. Addressing the concerns of your shareholder base is a significant move to show the market that there are preemptive measures for potential pitfalls.
Sometimes we hear executive teams tell investors that recession has a limited impact on their businesses; however, with the highly intertwined global economy, it is unlikely that a single industry or region could be insulated from the economic turmoil. In addition, when top-line growth is no longer attainable, inform the investors you have gamed out an action plan to maintain bottom-line performance. Ultimately, we hope the market understands that our executive team is fully prepared for any market headwind.
Demonstrate a long-term track record of your financial metrics.
The fundamental financial metrics of a company are critical factors for stakeholders to analyze if the executive teams are running the company efficiently and productively. In addition, ensuring the key financial metrics of the past quarters are presented in the disclosure materials allows the market to witness your long-term consistent track record. We understand the numbers may not always perform up to par; however, the gradual improvements are plain evidence of the executive team’s efforts and accomplishments. We expect the market to appreciate the executive team’s competent and trustworthy operational skillset to create value in the long term.
Weave your ESG goals into the company’s long-term strategy.
The trend toward ESG disclosure is steadily rising despite a substantial number of arguments on whether ESG has any practical importance for companies and society. Despite the criticism, ESG has become a mainstream investment evaluation factor and even a required annual disclosure document for public companies. With this in mind, defining a meaningful relationship between your key ESG metrics and financial/operational performance has become necessary. Mapping your ESG goals against your company’s long-term strategy is integral to keeping the market in sync with the company’s purpose and business model. Further, a growing body of evidence suggests that the market expects ESG efforts to translate into positive economic performance over an extended time eventually.
Set realistic expectations while keeping in mind the long-term goals.
The investment community is often interested in hearing about the company’s guidance. To help manage investors’ expectations of performance, having a cohesive set of estimates that considers the macro environment and industry trends may be a more prudent approach. Overly emphasizing quarterly or half-year guidance could lead to directing the market to focus on short-term profits instead of long-term growth, which is also what most companies hope to avoid when trying to construct a positive business fundamental with long-range goals.
Retell the company story.
Many public companies are on the investor’s radar, and there is nothing wrong with constantly reminding the market what your company stands for and plans to achieve in the next few years. To maximize the effectiveness of your core messaging, relay your company’s long-term goals, market opportunities, and growth strategies in the earnings disclosure materials again and again. As you aim to retain the investment community’s attention, consistently delivering your key messaging ensures your audiences understand your company’s positioning correctly.
