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John & I blogged earlier this year about the very difficult task of delivering bad news during earnings season. So, this is unfortunate to see:

“Our early read on the third quarter earnings season suggests one of the most challenging reporting periods – across sectors – in recent history.”

That’s from a recent Riveron blog. And while it’s not a very bold prediction given where many companies are finding their stock price, it’s a good reminder that regardless of whether your company gives formal guidance, your friends in Finance & IR may be looking for ways to get creative with Q3 earnings releases – and they also may be faced with extra Q&A during this quarter’s earnings call. Here are a few of the blog’s suggestions:

1. Reinforce the longer-term value of the company

2. Convince the Street that short-term dynamics are ringfenced

3. Focus on 2024 value drivers including those investors who may be overlooking

The Riveron team gives more color on each of these tips, which are definitely the types of messages I would want to be able to deliver if I were an executive trying to reassure my investors. But wearing my “securities lawyer” hat, some of the suggestions made my heart race – for example:

– Discuss sales meetings on the calendar and new partnership discussions in the works, and

– Convey the company’s ability to control the impact of short-term dynamics like inflation and global supply chain disruptions

While it is good to reassure investors that the company has a handle on things, there are many factors beyond the control of boards & executives, and you have to be careful to not be misleading. Plus, plaintiffs’ firms live for these kinds of assurances. So, if you find these types of predictions in your company’s earnings release, I offer these general tips:

– Make your best effort to frame predictions as expectations rather than guarantees.

– Be very clear that the company is speaking only as of the current date.

– Include appropriately tailored cautionary statements – with specific reference to any assumptions on which predictions are based.

– To the extent you’re able, ask questions to confirm that the company does indeed have backup & controls to support its statements. It may be misleading to share only positive aspects of certain topics without also disclosing downsides.

– Consider whether the statements set an aggressive precedent for investor disclosure expectations.

– Confirm that the disclosures align with the company’s other public statements.

Keep in mind that you’ll need to balance all that with making the safe harbor disclaimer as short as possible in the earnings call script – because as Adam Epstein points out, your CEO doesn’t want investors to run for the hills. The Riveron team also suggests taking this opportunity to introduce key operational leaders who are expected to contribute to the business in 2024, and notes that companies should set the stage without overcommitting to a specific timeframe. They make this good point that we can all get behind:

Companies that lead with a clear, compelling, and convincing story of strengthening in the months and years to come do not need to sell the exact timing of these improvements. Rather, it’s more important (and credible) to present a narrative that illustrates how all the elements are in place for a successful 2024.

Visit our “Earnings Guidance” Practice Area for checklists & other practical resources that will are intended to help you as questions arise.

– Liz Dunshee