Keeping things simple — and accessible — for investors…

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It was only a decade ago when quarterly earnings calls weren’t open to the public, and certainly not the media. As a reporter, I’d have to watch for any out-of-the-ordinary stock movements to signal some important piece of information, or I would rely on sources such as analysts or institutional investors to tell me what the guidance was. The secrecy around the whole process was not only frustrating but perplexing, too. The confusion the process wrought did nothing for broadening out the understanding of a company, its results or its prospects.   

That all changed with Reg FD, which was enacted in October 2000. All earnings conference calls are now broadcast to the public, sites like Seeking Alpha make transcripts available in near real time, and SEC filings are also freely available. Intel, for instance, now gets 600 people on the phone for its earnings calls and 3,000 on the webcast. All combined, the information available to the public and reporters has come a very long way in a relatively short time period.

With money, its best to keep it simple. Photo by AMagill.

Here in San Francisco recently, earnings calls and quiet periods took center stage at an IR panel discussion hosted by BusinessWire and moderated by Don Clark, deputy bureau chief of the Wall Street Journal, with Peter Schuman, manager, investor relations at Intel; Alex Hughes, director of investor relations at Dolby Laboratories; Stephen Schrader, partner at Baker & McKenzie; and Jim Jelter, corporate editor at MarketWatch.

The discussion boiled down to how best to communicate financial information. Jim Jelter had perhaps the best advice of the panel when he recommended companies trying to communicate with anyone would do best to keep it simple and to write and say – whatever it is – in plain English.

Likewise, Dolby’s Alex Hughes prefers to keep his company’s earnings scripts very short at around 15 minutes with the remainder of the time devoted to Q&A. The extended Q&A, Hughes said, increases the impact of what is discussed: He attributed a statement made during the scripted part of the call as worth only half the value as the same information provided in response to a question.

That’s a great observation — a higher degree of accessibility and willingness to take questions always seems like the stronger path to take. Next up would be allowing more buy-side investors to ask questions. Incidentally, a breakdown Text 100 did a couple of years ago on conference call structures for 10 major corporations showed the average time devoted to the scripted portion of a call amounted to a third of the call’s length, with the range falling between 20% and 50%. As a reporter, the calls with more Q&A always seemed more genuine and transparent. And simple.

Another topic covered during the panel discussion covered quiet periods, the times when companies restrict communications as executives begin to get insight into material information, such as financial results, before the information is disclosed to investors.

Dolby’s quiet period covers a total of five weeks during which no executives speak with the media. Intel acknowledged a lengthy quiet period covering half of its quarter. And, indeed, an informal study of clients and non-clients undertaken two months ago by Text 100 showed most quiet periods lasting around three weeks, pretty consistent with a 2001 study from NIRI on the topic. But the variance for our informal study was high – with the range of as little as four days to as many as 43 days. The legal guidelines around quiet periods remain unclear, which helps explains the variance, with attorney Stephen Schrader acknowledging that the SEC doesn’t really like “bright line” tests.

Here again we have another argument in support of clarity, plain English and simplicity.