Lights, Camera... Earnings?
More firms are trying to turn the staid earnings call into an elaborate production to drive engagement. Does it attract or turn off investors?
Can earnings calls both entertain and inform? More importantly, should they?
Earnings calls have always been performances of sorts, with firms scripting a story—usually a rosy one—around their results. But increasingly, more firms are turning them into elaborate productions, replete with intricate sets, colorful graphics, guest interviews, and more. Supporters say the new approach—which should be on full display as firms report second-quarter earnings over the next few weeks—brings both a dash of energy and a refreshing human touch to what is often a staid, if not robotic, exercise. But critics worry that it doesn’t provide the transparency into a company’s performance that investors are seeking.
“It can make for pretty awkward optics to have a call with all this flash and pizzazz and miss earnings,” says Peter McDermott, head of the Corporate Affairs practice at Korn Ferry.
To be sure, most observers say that the earnings-call format needs to be updated. The practice of executives reading a press release into a speakerphone to a mute audience of analysts and investors doesn’t exactly dovetail with how information is received or disseminated today. “Testing new ways to keep investors engaged during earnings is certainly worth a try,” says Joe Griesedieck, managing director of board and CEO services at Korn Ferry.
Elaborate or not, making a show out of earnings calls is all about engagement—not just with investors and analysts, but also with employees, customers, and other stakeholders. People tend to learn about earnings on social media, as they do all of their news, and firms have taken to breaking out results on X or LinkedIn as a prelude to the actual call. Moreover, since images and video perform better on social media than text does, sharing highlights via short clips can increase engagement, especially among the retail and day traders who are so active on social platforms. “Firms are looking for more ways to enhance the authenticity and interactivity of calls,” says Griesedieck.
Against the backdrop of the SEC’s proposal to reduce financial reporting from quarterly to just twice a year, earnings calls could become bigger and more performative, in the vein of an annual shareholder meeting or developer conference. Critics worry, though, that hyped-up earnings calls could give firms too much control over what is supposed to be an interactive, two-way dialogue between management and investors. Even during traditional earnings calls, firms screen questions from analysts and investors to avoid deeper probing that might not align with its messaging. Experts worry that the combination of reduced earnings reporting and more elaborate productions could reduce transparency at a time when more is needed.
Another concern: A bigger show may raise the stakes for what the firm will be reporting. Firms that know they are going to miss expectations will schedule calls after the market’s close to limit the hit to their stock price, for instance. But McDermott says firms that make a show of earnings announcements risk looking foolish if they ultimately must report disappointing news to investors. “The bigger the stage, the bigger the expectations,” he says.
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