As we wrap up another volatile quarter in the equity markets and look ahead to the Q3 reporting season, we wanted to look behind the scenes to show how an IRO prepares for a successful earnings day.
First things first, gather the financial data
An IRO works very closely with other teams within the finance department and accounting teams to gather and review financial data. The IRO is critical in reviewing, verifying, and compiling financial statements such as income statements, balance sheets, and other key financial data. A Corporate Accounting team often provides these that the IRO works closely with. The IRO also plays a crucial role in working with Legal and External Reporting teams to ensure these statements comply with SEC regulations.
Create a communication strategy
One of IR’s main roles is ensuring the company’s story is told in the best way possible. Regarding earnings releases, the IRO will work closely with Senior Management and Legal and Marketing/Communications to help put together a comprehensive messaging plan. The IRO will help decide what information will be disclosed and how the company will convey these messages to all stakeholders interested in the company. Clear and transparent communication is crucial to an IRO’s and company’s credibility.
Prepare investor materials
Once the hard part is done of gathering all the necessary financial data and the completion of the communication strategy, an IRO will have to prepare investor materials that will be shared with the market. Before the earnings release, the IRO will create and review investor materials. This includes driving the process to draft a press release highlighting the company’s performance and other financial data points.
In addition, an IRO’s main job is to ensure their executives are prepared for earnings day and prepare the management team for any questions they might get from the sell-side or investors. The IRO focuses on understanding the topics that interest investors. It typically summarizes them into a Q&A prep document, often used to run a rehearsal session with management to ensure readiness for the live call.
Did you think an IRO’s job was finished once the earnings conference call ended? Think again! The IROs day is just getting started!
After an earnings call, the IRO plays a critical role in communications, ensuring the company messaging has been properly conveyed to the market’s key stakeholders.
Follow-ups with investors
An IRO almost always coordinates follow-up calls with sell-side research analysts and institutional investors. This will involve answering any questions that weren’t answered during the Q&A of the conference call and providing any clarifications as needed. Accurate and timely communication with the Street will help maintain the team’s trust and credibility with the Street. However, these follow-up conversations must be conducted under the requirements of Reg FD, so no new disclosures are intended to be made.
Internal benchmarking and analysis
An IRO works closely with the executive team to keep them updated on the financial impact of the earnings day. An IRO will help keep the management team updated on how the stock is performing and what the investor community and media say about the company’s results. The IRO will often assess and recap the sell-side analyst’s reactions to provide to the executive team and the Board of Directors. IROs also offer perspective on buy-side feedback received during post-earnings conversations. This feedback will help to refine the ongoing messaging from the company.
Review the call and make sure the transcript is accurate
An IRO will ensure the transcript is accurate and submit any corrections to the main data providers. An accurate transcript is vital to ensuring investors and other stakeholders can review the details of the earnings call after the fact, particularly those who couldn’t join the call or are looking to review specific points made during the call. This allows everyone to have complete and accurate information about the company’s financial performance.
Having a successful earnings event
In conclusion, an IRO’s activities on earnings day and the days leading into and following earnings can be quite eventful. Still, with the proper planning and execution, it can make for a successful outcome that can be repeated each quarter.
Are you curious about the financial world and corporate storytelling? Read insights from Q4 Inc. Investor Relations veterans in our post, “What I Wish I Knew When I Started My Investor Relations Career (Part I).”
