For companies on a December 31st fiscal year, the third quarter is the 'tell' as to the full-year results: there’s only one quarter left, and at the time of reporting you’re well into that period. With continued uncertainty around consumer spending, travel and return to in-person activity, along with a record high number of new issuers, valuations are volatile and investors are seeking clarity.
While there is no universal playbook, we suggest companies remember the goal in reporting is to ensure your company’s performance is well communicated, that your strategic positioning is well-defined and your confidence in your prospects for a strong future is amply underlined.
- Don’t Forget the Vision! Too often companies get caught up in a strong performance and focus on taking the applause. It’s great, yes, but make sure your investors stay with you for the longer-term by reinforcing the strategy and vision that enabled you to produce exceptional results – and that you believe will do so into the future.
- Guidance Refrain from changing your guidance habits. Affirm or update annual guidance as usual and maintain a steady commentary on future periods. If there are known, industry-wide factors that will affect your business in the next year, be they the semiconductor shortage, supply chain disruption or freight costs, acknowledge them, but note as well that your teams are working closely with suppliers and customers to mitigate impacts.
- Growth Targets Whether you’ve previously shared growth targets either regularly or at an Investor Day, third quarter reporting is a time to address why you remain confident in those targets. Avoiding them causes higher investor anxiety, and often, there’s a well-founded reason why the current period isn’t yet at the level you are projecting.
- A Position of Advantage Many companies benefited from the pandemic, whether that be increased demand for products supporting a remote workforce, to far lower travel and operating expense costs. Some companies found opportunities to differentiate themselves from peers by marketing, product offerings or policy actions. These remain important, and investors are trying to calibrate how much of the advantage remains; are your margins artificially high due to operating costs that are likely to increase sharply? Are your margins temporarily depressed by higher transportation or raw materials costs that you cannot pass along to customers? Will there be a long-lasting and meaningful change in your office footprint, with its ancillary cost benefits? Depending on your position and outlook, you’ll want to be clear about your expectations without quantifying them for optimal transparency.
- Must We Still Talk About Covid? It depends. For businesses where the pandemic opened dramatic new opportunities, there’s much to be gained by fully sharing how your company made key progress – and that those markets remain strong. For most others, it’s reflected in cost structures and business practices, but you’re looking past the present times to a more normalized mode of operation. Help your investors share that view by speaking to what that might look like, again with any specifics you can share.
- Reinforce Your Operational and Financial Discipline However markets and the economy move, make it clear to investors that you’re well prepared. Speak to your balance sheet strength and any particularly innovative ways you’re financing growth. Be clear about your leverage position and as part of your capital allocation, the timing for reducing it. If every cent is supporting growth, articulate how you measure return on capital – and what steps you will take to adjust along the way as needed.
- Share the Stage Given the drama of this year, it won’t be surprising if there are more changes in the C-Suite. There are many new and fast-growing companies hoping to poach seasoned talent from more mature companies, and many newer companies are outgrowing the start-up talent that brought them to this level. Get ahead of this trend by ensuring that investors have exposure to your bench of senior management, whether by including them on quarterly calls or involving them in a conference appearance. The goal is not to replace your CEO and CFO as the main investor contacts, but to demonstrate a well-functioning senior team implementing the company’s strategy.
At a high level, we advise companies to be concise rather than verbose; use specifics rather than generalities. Most companies are not providing 2022 guidance at this time of year, and even if your visibility is lower than you might prefer, it’s better informed than the contradictory tea leaves that external parties are reading. And when we’re through with this quarter, it will be time to plan for 2022 in earnest. Feel free to reach out to us if we can be of assistance in evaluating options to expand your marketing, raise your visibility and further demonstrate your credibility with the investment community.
Mary T. Conway, Principal of Conway Communications, brings extensive experience in investor relations and financial public relations. Prior to establishing the firm in 1998, she held senior positions at several Boston public relations firms, providing investor relations consulting, client service and new business development.
Conway Communications is a boutique investor relations firm offering diversified investor relations
and strategic communications capabilities to the challenges organizations face in securing their position with important stakeholders. Based in greater Boston, Conway Communications offers flexible, tailored services to meet the specific needs of each client, offering interim or permanent counsel, for an immediate need or ongoing support.
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