Corporate America’s earnings call tradition has been long overdue for a makeover, but with COVID-19 a change is needed more than ever.
Every Wall Street investor and analyst knows the classic dreaded earnings call: 30 minutes of chief executives and chief financial officers reading a script chock-full of numbers and needless (heavily adjusted) detail that can be easily found in public documents.
The experience can transport one back to the days of agonizing school presentations in which PowerPoint screens and cue cards were read word for word with little intonation. Listeners tune in to earnings calls each quarter primarily for the question-and-answer portion that comes later on, but they may have to wait until 5 p.m. New York time or later for the many companies that don’t report results until after the trading day ends. Further, company managers tend to go long on the speeches, then rush the Q&A.
It’s a format that serves no one, and yet every 13 weeks it arrives just the same. When I half-jokingly tweeted about this last week, I was surprised not by how many people felt the same, but that some responses said to do away with earnings calls altogether. That would also be a mistake.
These conference calls are a chance to hear from some of the most powerful people in business — leaders who have a remarkable vantage point when it comes to what’s happening in the broader economy. In normal times, the discussions can be fascinating, especially when executives ditch the robotic jargon. Since the coronavirus hit they’ve become even more illuminating, offering some of the best insights into the various ways that the pandemic has altered society and who’s been hurt most. Randall Stephenson’s final call as CEO of AT&T Inc. is one such example.
Netflix Inc. also has an interesting approach. In lieu of a widely held conference call, each quarter one analyst conducts a pre-taped 35- to 45-minute virtual video interview with Netflix executives that gets released on YouTube following the financial results:
In a fast-moving public-heath and economic crisis, last quarter’s report card feels stale and can’t be used as a barometer to forecast what’s to come. That makes the calls indispensable. (And incidentally, it’s why I wrote on Friday that shareholders would be better served if Warren Buffett’s Berkshire Hathaway Inc. held its own earnings calls, instead of waiting to hear from him at the once-a-year annual meeting and occasional TV interview.)
Also, as the national work-from-home experiment continues, with parents juggling round-the-clock office hours, kitchen hours and parenting hours, time is precious. Analysts and investors often have to cover numerous earnings filings and calls a day, and so it’s no surprise that so many research reports hit our inboxes in the middle of the night. Leaving the calls as purely Q&A forums would be more productive, as would saving certain questions that get too in the weeds for a discussion off-line with an investor-relations representative.
A word that gets thrown around a lot lately is “unprecedented” — these unprecedented times, an unprecedented crisis, etc. It’s all the more reason to hear directly from the people who can help the world better understand what’s going on and what’s needed to recover. In another 13 weeks let's see who’s up to the challenge.
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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