May 21, 2024

Earnings Calls: The SEC Continues to Listen In

This recent Barnes & Thornburg blog gives a timely reminder that one of the audiences listening to your earnings calls is regulators. It discusses the SEC’s continued focus on consistency among various disclosures and its use of earnings calls to comment on SEC filings.

The blog highlights a spring 2024 comment letter focused on known trends or uncertainties disclosures in MD&A and company comments on a fourth-quarter earnings call regarding the company’s refinancing strategy. The company’s response to the comment called out business section and related MD&A quantitative disclosures but also agreed to further address the strategy in MD&A by adding a new narrative paragraph.

Other recent comment letters address the importance of “synchronizing what will be said on the earnings call with what will be disclosed in a company’s SEC filings.”

This follows two other recent comment letters from SEC staff related to earnings calls: A January 2024 letter and response that discussed whether metrics mentioned by a company’s CEO on earnings calls two quarters in a row were key performance indicators for the business and another from the same month that asked whether refurbishment revenue that was discussed on the past two quarters’ earnings calls should be broken out separately in the notes to a company’s financial statements.

The blog suggests that the folks who prepare MD&A pull recent earnings call transcripts when drafting. I’d also add that someone needs to review the earnings call script and MD&A disclosures for consistency — possibly twice each quarter to ensure it’s done on nearly final versions. The script, prior call transcripts, and analyst reports are also helpful resources for outside counsel to add value by doing a holistic review. Sometimes it may also be appropriate to add language to the 10-Q or 10-K before filing if senior management responds to a question or adds color on the earnings call that the financial reporting team deems worthy of including.

Meredith Ervine