Being a former journalist, this one is dear to my heart because this one is about how to make your earnings release better for financial reporters. But, making your earnings release easier for reporters to peruse will consequently make it easier for investors and the general public to understand, too.
As compiled by Ciara Linnane and Tomi Kilgore at MarketWatch, here are nine ways to make your earnings release better, period.
- Don’t make the numbers hard to find
Earnings releases aren’t Easter egg hunts, yet an increasing number of companies are treating them as such, particularly when it comes to numbers.
In an effort to make earnings releases more aesthetically pleasing and interactive (or something), more companies are putting out earnings releases with only a snippet of information about earnings and then forcing people to click through to so-called “Smart News Releases” and then clicking on images or other elements to find important numbers in one of the least fun games of hide and seek around.
This adds extra steps to the process of reading the numbers, plus it can funnel people to a website that slows as more people click the links to find the hidden numbers.
Nobody really cares how fancy your earnings release is except the people who made it, but they don’t count. The simpler, the better.
- Don’t flip your tables so they read ‘backwards’
Always put the current quarter first. Always. These are the new numbers, which means — as the name implies — they are the news. It’s intuitive to jump to the first column or row and expect it to have the latest numbers. Don’t go against that intuition.
- Refrain from using too many numbers up front
Sometimes a company wants to disclose every single number they can think of and that’s fine … providing it’s done correctly. If you want to give all the numbers, kindly put them in a table at the bottom.
There’s a lot of numbers to go through if all you’re doing is trying to figure out earnings based on generally accepted accounting principles (GAAP) and non-GAAP. So, having things like the not-at-all-clear “income from continuing operations attributable to noncontrolling interest” lumped in with all your numbers only adds confusion.
The easiest way to do the full disclosure thing isn’t by giving out as many numbers as possible in as many different combinations, but to clearly indicate what your bottom line number is.
- Don’t try to hide bad news
Again with the hiding.
Many companies think they can hide bad news like losses at the bottom of a news release or by strategically (or not-at-all-strategically nowadays) releasing it just before the weekend when when people’s minds have already checked out and they’re just waiting for their bodies to be released from the gulag that passes for an office.
Regardless of where you put the bad news in a release, it will eventually be seen. Putting it in the ninth paragraph as opposed to the first paragraph or waiting to release bad news at 4:30 p.m. on Friday is really just an insult to the intelligence of anyone reading the release. They know what you’re up to and now you’ve just made them angry.
- Stop with the vacuous executive quotes
Now that I’ve switched over to the PR side of things and I write vacuous quotes for people rather than reading and snickering at them, I can appreciate this from both sides. A CEO wants to have a presence in the release, but probably doesn’t want to ‘say’ (there is approximately a 0% chance that they actually wrote or said the quote themselves) anything negative.
However, it’s not about positive and negative. It’s about useful and useless. A useful quote will explain something or say something about what the company plans to do in the future (again, news means new).
Linnane and Kilgore provide handy examples:
Useful (courtesy of handbag retailer Vera Bradley): “We are not attracting enough new customers to the brand, and traffic and sales are still very challenging,” Robert Wallstrom said in the retailer’s first-quarter statement.
Useless (courtesy of General Motors Co.): “Our results in the first quarter provide a solid foundation to achieve our financial commitments for the year,” said GM Chief Executive Mary Barra.
- Don’t expect people to math for themselves
Some people just have an innate ability to look at numerals and figure out sums with little effort. Others, like myself, need a half-hour and a calculator app just to figure out a 20% tip.
That’s why anything that needs calculating (like the example Linnane and Kilgore give of an “impact per diluted common share” that needs to be added back to the diluted EPS number to get an adjusted number that matches the consensus) should be pre-done to save everyone a potential headache.
- Don’t put big news into a video
The thing about videos is that if you don’t know where the news is going to be, you don’t know which part of the video to skip to. At least with a written release, you can quickly scan it and get to the important stuff quickly (which should be at the top, anyway). But with a video, you are forced to watch the whole thing.
Opt for an easy-to-read format rather than a pain-to-watch format and save the video for people who actually want to watch it (most likely nobody except the people who made it).
- Don’t try to be sneaky with expectations
A trick that Priceline.com regularly tries to pull, according to Linnane and Kilgore, is to constantly low-ball earnings expectations so the company can say they handily beat them, like when it “provided a second-quarter adjusted earnings-per-share outlook of $10.95 to $11.75, which was well below the FactSet consensus at the time of $13.13” (the seventh straight quarter that the company had lowered its earning expectations).
Again, this one is just an insult to readers’ intelligence.
Follow the Leader
If you are looking for an earnings news release to use as an example for how it should be done, Linnane and Kilgore recommend the ones released by Nordstrom Inc. because they:
- start with the key numbers,
- report one figure per metric,
- contain bullet points with just a few highlights,
- don’t bother with a hollow quote from an executive, and
- are easy to follow.
For bonus points, publish the full transcript of conference calls on your website.
Here’s a fun challenge: see how much you can improve your next earnings release. Investors, analysts, reporters and anyone with an interest in reading it will thank you.