With earnings season in full swing, it’s a good time for us to reiterate a critical best-practice issue: include earnings tables in your press release. Notice-and-access, the practice of omitting tabular data from a press release in lieu of a link to the data is clearly a step in the wrong direction.
We have an ongoing dialogue with the major financial wires, news services, regulatory authorities, investor systems, information portals and investor relations officers about this and other disclosure issues to ensure Business Wire delivers the type of content market participants want.
The incontrovertible evidence is clear: key market participants want releases to include financial tables (‘face financials,’ at the minimum). Additionally, issuers reap tangible economic benefits by including-and broadly disseminating-core financial data to the investment universe. A recent academic study statistically validates the significant return on investment for listed companies that are pro-active in their investor outreach.
In a trading environment where latency and milli-seconds are often critical to success, notice-and-access releases are unnecessary impediments that are disruptive to the seamless workflow procedures favored by both institutional and individual investors.
Providing core financial data to editors, analysts and investors in a freely accessible press release—transmitted simultaneously and in real-time—consolidates material information in a readily digestible format, streamlining both availability and analysis.
An informal survey of key market observers lends independent credence to the argument:
“We would very much like to see the tables included as part of a release,” said Rick Stine, senior editor, Americas, Dow Jones News Services. “Companies that include truncated data in the text of a release are often highlighting the numbers they want you to see, not the GAAP numbers that they are ultimately required to report. We believe it is important for them to continue reporting in the easiest fashion possible the GAAP numbers. Having to make people take extra steps to find them to me isn’t a great idea. I do think convenience for readers is important.”
Martin Howell, news editor, company news, the Americas, Reuters News, said, “We always need the table—it helps us on speed, it helps us to be fair, it helps us to compare and contrast, it helps us to get beyond the spin. Why would anyone drop the tables unless they had something to hide?”
The National Investor Relations Institute [NIRI] arrived at similar conclusions in its recent study of industry “best practices.” NIRI’s soon-to-be published Earnings Release Standards of Practice makes the following recommendations:
- Content a. Provide sufficient line-item information for the investor to follow the calculation from revenue to net income b. Use a consistent format to display shares outstanding
- Provide a complete income statement, with current and year-ago quarter numbers, and current year-to-date and year-ago year-to-date comparable period numbers. To avoid confusion, label numbers as audited or unaudited, particularly at year-end if the released numbers are not yet audited and could change in the 10-K filing. Income statement should include number of shares outstanding, fully diluted and basic, for each publicly listed stock
- Provide a complete balance sheet, with current quarter numbers and end of prior-year numbers, labeled as audited or unaudited
- Provide cash flow tables, if possible. Both the CFA Institute and the SEC’s CIFiR Committee recommend inclusion of cash flow tables. However, some companies note that this information may not be finalized at the time the earnings release is issued.
- Provide consistent supplemental company or segment information as appropriate.
There also are financial rewards for issuers that are truly committed to communicating with investors. Eugene Soltes, a doctoral candidate at the University of Chicago Booth School of Business, found a statistically significant relationship between greater dissemination of company-generated news and corresponding capital market benefits, including lower bid-ask spread, increased trading volume and lower idiosyncratic volatility. A key finding: “A reduction in trading costs due to greater dissemination may also contribute to a lower cost of capital.”
As public companies move to adopt recent SEC mandates to XBRL tag financial data, the need and value of these tables will only increase.
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—Neil Hershberg, Senior Vice President, Global Media, Business Wire