CIRI: Guidelines for Conference Calls

BREAKOUT SESSION #2 – Guidelines for Conference Calls (General)

Moderator: Andrea Bargetzi
General Manager, Chorus Call Canada Corp.

Speakers: Susan McCracken
Professor, DeGroote School of Business, McMaster University

John Reucassel: Managing Director, Financial Services – Life Insurance and Diversified Financial Research, BMO Capital Markets

Remember that Conference calls provide the broadest non-print audience, and your best tool in telling your companies story and for investors to get and feel for management — maximize the benefit!!

John Reucassel “ Sell side analyst, made things a lot more interesting, as this is obviously the target market. Has listened to 1500 calls, or 42 solid days of conference calls. Focused on 5 things to do with good and bad calls, suggestions to improve, from the view of end users.

What’s the value of the call?
Let’s you provide YOUR version of the story, not-re-interpreted by the media or analysts. It should provide updates on:

- Current financial results (every 3 months you get to re-tell your story)
- Industry conditions and competitive issue
- Strategic plans for the future.

Though things may not have changed much, REAL value comes from:
- Change in management “tone” — more pessimistic, more optimistic
- Industry/company outlook changes- (Warren Buffet says: I’d rather own a bad management in a good industry then a good management in a bad industry)
- Differences in actual results with forecast/gauging market expectations

What Makes a Call Bad
- CEO’s/CFO’s who read slides directly
- Calls that are too long — should be only 15 minutes, 20 minutes max. If it’s longer, message isn’t focused.
- Evasive answers to questions. He figures 30% don’t get answered. It’s OK to answer the question and then turn it into a discussion of some strength.
- Being “scripted” adds no value, defeats purpose of call. (Asks: “Has anyone every been sued for comments made by a CEO”. Just be honest and open!)
- Not being courteous to conference call participants.

He doesn’t remember any good ones, but remembers bad ones.

What Makes a Call Good?
- Succinct presentation of the MAIN DRIVERS of results
- Some statements about current conditions (but not Guidance)
- Q and A sessions that answer the questions. Some management is even proactive and provides theoretical questions and answers
- No such thing as too much disclosure “ they all help to improve the quality of the call. Get it out at least 2 hours before the call “ however.

Tips to deliver bad news.
- Do not be defensive, be humble, say sorry if necessary
- Put all bad news on the table (don’t have 2 of these calls ˜cause the first one didn’t do the trick)
- Be clear about the problem, because that shows you understand it
- Don’t set a time limit, answer as many questions as there are
- Prep and coach management for aggressive questions (don’t bite back — answer as best you can)

To improve the call
- Provide a short slide presentation. This is important as it allows you to frame the call discussion. Even 4 or 5 shows you are in control of the message
- Anticipate the Q & A. And prep on the questions.
- Management should be candid not promotional or scripted
- Management is sometimes dismissive of the audience — don’t be disingenuous to callers, people become distracted by the tone, rather than the message and framing of discussion the company wants to portray.
- Session Q and A

What about other executives speak?
Very helpful, especially if you have different operations guys, Helps educate the investors, increases exposure of senior management team.

When should companies start doing conference calls?
If related to size, small cap company calls are short. Does allow you to start developing a following.

Should companies provide transcript of the call?
Analysts really like this. So is a best practice.

What are Best Practices for Online Archiving
John has gone back 5 years in some cases. Leave up as much as you have, as it doesn’t cost much to have archived materials on the website.

What information should be provided before the call?
Analysts will never say, “too mush information”. What they want:
- MD&A
- Full financials (supplemental documents)
- Stuff that is important to understanding your company (though may be non-GAAP) such as sales trends, stuff for your specific company, trends in margins, trends in market, etc.
- Slide presentation (can be more work, but slide presentation allows you to frame the conversation, frame the call.

Video cast vs. Audio cast – preference?
Audio cast. Doesn’t like sending questions over the web. Likes the real time response. Most time knows the answer to his question, is checking for the tone change, answer change. Doesn’t see value in seeing the presenters face.

When the best time to have the call?
Prefers numbers to come out before market opens (7 am eastern) then have a call around 9-11am. (In states release day before or night before, call next day). Doesn’t like calls in evening as interrupts personal life. Release early enough to assess before markets.

Don’t release bad news Friday after 5. Get it out early.

What about CFO regurgitation of numbers?
CEO should start the call and generally frame the results. CFO should take it deeper, and depending on the complexity of the company may take some time.

What about media attending the call?
Media can have different reasons for attending the call, and so should have a bit of time for them after the analyst portion. While John doesn’t think anyone should be excluded from anything, just say “know let’s move to the media” (sometimes media more on top than analyst). Media has different focus, for instance, Manulife’s China operations, story sells papers but doesn’t make stocks go up. Sometimes media also are not as savvy with the numbers and get things wrong.

Other speaker: Susan McCracken
McMaster University

There has been a survey done of conference call practices, but this was essentially a report on what everyone knows, and was not prescriptive of the future. John’s material was much more important then the history portrayed in the survey.

Excellent talk altogether. Folks like John make this event truly worthwhile.